It doesn't matter how long you've been an investor -- nothing could have prepared you for the volatility we've witnessed in 2020.
The coronavirus disease 2019 (COVID-19) pandemic has crippled the U.S. economy, ultimately sending the unemployment rate to levels not consistently seen since the 1930s and paving the way for the fastest and steepest bear-market correction in history. It took just 33 calendar days for the benchmark S&P 500 to lose 34% of its value.
But the thing about fear, panic, and bear markets is that they're an excellent time to put your money to work. Even though equities have come full circle since the March 2020 bottom, history suggests that bull markets tend to last for substantially longer periods of time than bear markets. This means that a patient investor who allows their thesis to play out over years or decades could be handsomely rewarded.
The big question, as always, is what to buy?
The answer just might be the following three great stocks. Not only do these companies have the potential to make investors money, but I believe they have the innovation and intangibles needed to make millionaires out of long-term investors.
One of the most powerful growth trends we're going to witness in the years and decades to come is the push toward cashless transactions. While Visa and Mastercard will continue to play a vital role in facilitating the move to credit- and debit-based transactions, it's Square (SQ -1.94%) that offers the most promising growth and share price upside.
People are probably most familiar with Square's point-of-sale platform. The company's seller ecosystem has seen gross payment volume (GPV) on its platform grow from $6.5 billion in 2012 to $106.2 billion in 2019. For those of you keeping score at home, that's a compound annual growth rate of 49%.
Even with GPV likely to take a hit in 2020 due to the pandemic, there are two trends to suggest that Square's seller ecosystem is still in great shape. First, economic expansions last considerably longer than contractions, which bodes well for consumer spending. And second, Square's GPV is increasingly derived from larger businesses (defined as those with at least $125,000 in annualized GPV). Square's been known for years as the small-business payment facilitator. If it can make inroads with larger businesses, the sky's the limit for its merchant fees.
Even more exciting is Square's peer-to-peer payment platform Cash App. Between December 2017 and June 2020, Cash App's monthly active user (MAU) count soared from 7 million to over 30 million. Square generates revenue from Cash App when users buy goods or services using the App or Cash Card -- a traditional debit card that links to an individual's Cash App balance -- when balance transfers are expedited or when users exchange or trade bitcoin.
In the most recent quarter, gross profit for Cash App rose 167% to $281 million, and it's likely to be the key segment to Square's long-term profitability.
Running a successful social media company isn't as simple as it sound. Investors have witnessed far too many instances where user growth or sales rocket higher for a couple of years, then stall out. That doesn't look like the case with Pinterest (PINS -0.51%), which is firing on all cylinders and offers true multibagger potential.
The evidence of Pinterest's success can be seen in the company's MAUs. Over the past year and including at least four months directly impacted by COVID-19, Pinterest has added 116 million users, pushing its MAUs to 416 million (an increase of 39%).
What's noteworthy is that more than 90% of these new users are coming from international markets. Although average revenue per user (ARPU) is much higher in the U.S. than it is in overseas markets, the other way to look at the company's international ARPU data is that it can be doubled many times over. Last year, Pinterest indeed more than doubled international ARPU.
Clearly, an ad-focused platform like Pinterest isn't well-suited for a recession, but recessions don't usually last very long. That means these overseas users are an expected source of significant long-term growth.
Maybe the most intriguing catalyst for Pinterest is its burgeoning e-commerce presence. The company already offers a platform for users to share their interests, so it makes sense for Pinterest to attempt to connect these users with small businesses that specialize in selling products and services tailored to these interests. In addition to partnering with Shopify, which should be a boon to small businesses selling products to Pinterest's user base, the company has rolled out a host of features on its site designed to entice users to action, such as clickable shop buttons and engaging video ads on pin boards.
I believe Pinterest has consistent double-digit annual growth potential and could easily surpass $100 billion in market value by 2030.
Finally, telemedicine giant Teladoc Health (TDOC 3.43%) has all the tools needed to make you a millionaire.
There's no question that Teladoc has been one of the clear-cut beneficiaries of the coronavirus crisis. Doctors want to keep sick people and those with chronic health conditions out of their offices as much as possible during the pandemic. This has led to a rapid rise in telehealth visits for subscribers and fee-only users (i.e. non-subscribers) on Teladoc's network. In the June-ended quarter, total visits more than tripled to 2.8 million, with total paid U.S. memberships rising 92% to 51.5 million.
But it's important to also understand that precision medicine was trending well before COVID-19. Between 2013 and 2019, total revenue for Teladoc skyrocketed from $20 million to $553 million, and there's a chance it could eclipse $1 billion in 2020. Not only does telemedicine provide a more convenient experience for patients, but it's generally cheaper for insurers, providing added incentive for future use.
Also exciting is the fact that Teladoc Health and Livongo Health (LVGO) are merging in a cash-and-stock deal. Livongo's healthcare solutions help patients with chronic health conditions live healthier lives. It does this by aggregating copious amounts of patient data and leaning on artificial intelligence to provide tips and nudges to change the behaviors of people with chronic illnesses so they do a better job of staying on top of their diseases.
Livongo's diabetes member count has consistently doubled on a year-over-year basis, and the company has generated three consecutive quarterly profits, despite the fact that it's only signed up 1.2% of all diabetics in the United States. As Livongo organically enrolls new diabetes patients and expands into new indications (hypertension and weight management), its potential patient pool is going to surge higher.
This combination of Teladoc and Livongo might take a few quarters to get used to, but it represents the future of precision medicine.