It's a bit of an understatement to say that the stock market has been pretty wild this year. The S&P 500 index took a steep drop in March and then rebounded significantly in the following months, and is now up 15% over the past 12 months.
Tech stocks, in particular, have been at the top of investors' wish list as the pandemic has forced people to spend more time at home than ever before, using various technology products and services to get things done. But even tech stocks have experienced volatility, with investors selling off some of their shares at the beginning of September.
So where does all of that leave the market right now? Despite the unpredictability in stocks, investors shouldn't be scared of the market. Long-term investors understand that buying stocks, and holding them for years, is still a great way to build wealth -- no matter what has happened over the past few months.
And if you're looking for a few great places to invest your money right now, there's no shortage of opportunities. Here's why Fastly (FSLY 4.43%), Square (SQ 2.32%), and NVIDIA (NVDA 6.18%) should be at the top of your list of potential stocks to buy in October.
Image source: Getty Images.
1. Fastly: This company's moving at the speed of light
If you're unfamiliar with Fastly, you should know that this tech stock has been benefiting in 2020 from companies looking to speed up their websites and apps. For example, one of Fastly's biggest customers is ByteDance's TikTok, which uses Fastly's services to deliver TikTok videos quickly and efficiently to users.
But while TikTok accounts for about 12% of Fastly's top line revenue, the company has many opportunities that go beyond the video-sharing app. For example, Fastly added 114 new customers in the second quarter and has some big-name customers on its roster, including Shopify, Spotify, and Slack.
Fastly's strong second-quarter earnings showed investors just how well the company is doing despite the pandemic, as year-over-year sales increased 62%. Additionally, the company's adjusted earnings per share (EPS) of $0.02 outpaced Wall Street's consensus estimate of an EPS loss of $0.01 for the quarter. And there could be more growth where that came from.
With people spending more time at home than ever, companies are looking for ways to make user and customer online experiences as good as possible. And even when the pandemic is in the past, it's likely that companies will continue using Fastly's services as entertainment, shopping, and communication services expand online.
2. Square: It's still hip to be Square
Another fast-growing company that investors may be wise to put some cash into right now is the payment-solutions company, Square. You've likely seen the company's bright white point-of-sale terminals at coffee shops and other retailers, but Square is also a play on digital payments and e-commerce.
Square's online payment processing services and its popular peer-to-peer payment app, called Cash, have benefited from an influx in digital payments during the COVID-10 pandemic. The shift to digital payments helped Square's revenue increase 64% in the most recent quarter and pushed its Cash App sales up 140% (excluding bitcoin transactions).
Square was already benefiting from consumers' transition to e-commerce before the pandemic, and it's likely that even after things have returned to normal the company will still experience growth in this market. That's because e-commerce only accounts for 16% of total retail sales in the U.S. The e-commerce market is expected to grow into a $476 billion market by 2024, up from $374 billion this year. And as it does, Square's Cash App and its online payment processing services will be able to expand right along with it.
3. NVIDIA: This tech stock is cashing in its chips
And last, but certainly not least, is NVIDIA. Some inventors may already be very familiar with this company, but if you're not, then just know that NVIDIA is the leader in discrete graphics processing units (GPUs) that power some of the best computer graphics on the market.
NVIDIA has been the GPU maker of choice for years and holds about 80% of the discrete GPU market right now. But the company has also figured out ways to use its GPUs for more than just gaming, and its chips now power artificial intelligence processes for some of the biggest tech companies in the world, and are used as the image-processing brains for semi-autonomous vehicles.
NVIDIA has capitalized on its dominant chip position, and its latest quarterly figures show just how well it's doing. Total revenue grew 50% in the second quarter, while the company's data center sales spiked 167%. Additionally, NVIDIA's earnings per share shot through the roof with a 76% gain compared to the year-ago quarter.
All of that would be impressive enough on its own, but NVIDIA could become an even bigger chip powerhouse once it closes on its acquisition of Arm Holdings. NVIDIA entered into a deal to buy Arm from SoftBank Group for $40 billion in cash and stock and expects to close on the purchase in 18 months. Why does this deal matter for NVIDIA? Because Arm licenses the chip designs that are found in about 90% of smartphones. Once the deal closes, it'll make NVIDIA a key player in the smartphone market in addition to its already prolific role in the GPU space.
Buy and hold, and then hold some more
The stock market is always a bit unpredictable, but it's even more so right now as investors try to figure out how to invest during a pandemic-induced recession. This means that you may need to be ready for some big share-price swings in the coming months. The best approach to buying these stocks is to commit to holding them for several years, not months, to give them time to outpace the market and benefit from the moves they're making right now.
