Investing in 2020 has been challenging, to say the least. In a roughly six-month stretch, the stock market plunged at a faster pace than ever before, as well as rebounded to new highs more quickly than it's ever done. We expect moves like this about once a decade, but not crammed into a couple of months.
But just because equities have firmly put the March 23 coronavirus crash low in the rearview mirror and kept alive a streak of erasing all bear market declines throughout history, we haven't seen the end of volatility. The unemployment rate is still historically high, there isn't any certainty when it comes to a coronavirus disease 2019 (COVID-19) vaccine, and we have an election upcoming in less than seven weeks that also provides no guarantees at the moment.
However, volatility doesn't have to be your enemy. It can actually be your ally if you have a long-term investing horizon and a desire to buy high-quality companies at a perceived discount.
Best of all, you don't need to have a mountain of cash on hand to build wealth in the stock market. If you can spare $300, which won't be needed to cover emergencies or pay bills, you have more-than-enough money to buy the following great stocks.
When it comes to steady growth trends over the next decade, cloud computing and cybersecurity are probably at or near the top of the list. So why not buy a superior cybersecurity company whose solutions were built within the cloud? Combining the best of both worlds, I give you CrowdStrike Holdings (NASDAQ:CRWD).
If growth stocks are your thing, you're going to love CrowdStrike. In each of the past three years, the company's year-over-year subscribing customer count has grown by 176%, 103%, and 116%, respectively, with its fiscal second-quarter operating results pointing to a 91% increase from the prior-year period. Before you start crying wolf about "slowing growth," remember that the recently ended quarter was the most challenging for the U.S. economy in decades.
In addition to rapid customer growth, CrowdStrike's existing customers are spending a lot more. During the first quarter of fiscal 2018, only 9% of its clients had four or more cloud module subscriptions. As of the second quarter of fiscal 2021 (13 quarters later), this figure is up to 57%. CrowdStrike's artificial intelligence-aided platform is built to be scaled, and its margins rely on existing customers spending more.
As one last note, CrowdStrike generates 93% of its revenue from subscriptions. A subscription-based model tends to deliver highly transparent and predictable cash flow, while yielding little customer churn.
Elanco Animal Health
I've said it before, and I'll say it again: Never bet against the U.S. pet industry. That's why Elanco Animal Health (NYSE:ELAN) is a company that should be bought by opportunistic investors during periods of heightened volatility.
Just how steady is the U.S. pet industry? According to spending data from the American Pet Products Association, we haven't seen a year-over-year decline in expensing on companion pets in at least a quarter of a century. This year alone, an estimated $99 billion will be spent on our adopted members of the family, with $30.2 billion on veterinary care and product sales. For three decades, pet ownership has done nothing but rise in the U.S., and the industry has proved itself to be virtually recession-proof.
What makes Elanco Animal Health so exciting is its recently completed acquisition of Bayer's animal health unit for $6.89 billion in cash and stock. The deal makes Elanco the second-largest animal healthcare company, and juices up the combined company's product pipeline, which is expected to now see 25 new treatments introduced by 2024.
Furthermore, combining Elanco and Bayer Animal Health should save up to $300 million in annual cost synergies and provide meaningful margin expansion, considering that half of the company's sales are now derived from the companion animal segment.
When the going gets volatile, investors generally look for safe-haven investments. Over the next couple of years, few industries could provide protection quite like gold stocks, which is why my personal favorite SSR Mining (NASDAQ:SSRM) is worth your time.
In all my years of investing in the stock market, the catalysts for the gold market have never been this perfect. Global bond yields have plummeted, and the Federal Reserve has pledged to keep lending rates low for many years to come. To boot, the Fed is also ballooning the money supply with its historic unlimited quantitative easing initiative. This means we have a ballooning money supply that'll pressure the U.S. dollar and few avenues to generate secure income that'll outpace inflation. In other words, gold is going to have a field day.
More specific to SSR Mining, it closed its merger of equals with Alacer Gold on Wednesday, September 16. The all-share deal creates a company capable of 780,000 ounces of annual gold production, with a healthy net cash position and the ability to generate $450 million in annual free cash flow through 2022. I suspect that we'll see a dividend and/or share repurchase program instituted in the not-so-distant future.
Additionally, SSR Mining took quite the beating in August after it reported its second-quarter operating results, which were impacted by COVID-19 mine closures. These closures were precautionary, required by government regulators, and fully expected, meaning the move lower in the company's share price appears unwarranted. With all mines currently up and running, SSR Mining is primed to surprise Wall Street with its potential.
Green Thumb Industries
You might not think of cannabis as a safe place to put your money to work during periods of increased market volatility, but marijuana has acted as a consumer staple throughout the coronavirus crisis. This would suggest the industry is relatively recession-resistant.
As for Green Thumb, it's a lightning rod for rapid growth. This company is operating 48 retail locations in the U.S. but has licenses to double its store count to 96. In total, it'll have a retail, processing, and/or cultivation presence in a dozen states, many of which are capable of $1 billion in annual weed sales by mid-decade.
In my view, Green Thumb's most exciting growth potential will come from Illinois and Nevada. Illinois is a limited-license state that opened its doors to recreational pot on Jan. 1, 2020. Meanwhile, Green Thumb bought its way into the Nevada market via the Integral Associates acquisition. By 2024, Nevada could lead the country in cannabis spending per capita.
But what makes Green Thumb most attractive is that close to two-thirds of its sales are derived from high-margin derivatives (e.g., edibles, vapes, beverages, tinctures, and topicals). This product mix is the reason Green Thumb appears ready to turn the corner to recurring profitability.