These are interesting times for investors, but the wild swings also create opportunities. I didn't sit still last week. I made a few stock purchases last week, and now is probably a good time as any to dive into my reasons for buying into the market last week.
I added to my recent Lemonade (LMND 1.44%) stake, and initiated positions in Fastly (FSLY -3.35%) and NextEra Energy (NEE 0.51%). Let's take a closer look at why.
Image source: Getty Images.
Lemonade
There's a fresh way (one could even say a fresh-squeezed way) to look at the property insurance market, and Lemonade is leading the way with its model, which blends artificial intelligence (AI) with a dash of altruism to make things click. Lemonade is an online platform that offers insurance for renters and homeowners.
It's quick and painless to score a quote, taking as little as two minutes of interacting with Lemonade's AI chatbot. Claims can often be handled through a different chatbot. The appeal is strong, with its customer base nearly doubling over the past year. It's also sticky with young customers: 70% of its account holders are 35 or younger.
Most of Lemonade's policies are for apartments, but with low mortgage rates and the suburbanization trend inspiring some Lemonade customers to become homeowners, this could be pretty potent, since the average homeowner premium is six times greater than a Lemonade basic renter policy.
The stock's been a wild ride since going public at $29 in July, soaring as high as $96.51 on its second day of trading, only to give back more than half those gains. It's also a heavily shorted stock, so the price swings will continue to be wild.
Fastly
One of the hottest stocks of 2020 has come crashing down the past three weeks. Fastly offers an efficient content-delivery network, and it was one of Wall Street's biggest year-to-date winners until it slashed its guidance in mid-October following a drop in revenue from its largest customer.
TikTok accounted for 10.8% of Fastly's revenue through the first nine months of the year, but it removed most of its U.S. and non-U.S. traffic from its platform by the end of September. Losing TikTok is a big hit, but it's largely a political issue rather than one specific to Fastly's service. The stock would go on to shed nearly half of its value, declining in 12 of the 13 trading days through the end of last week, before starting to bounce back.
Companies that hose down their forecasts are typically ones that you want to keep away from, but Fastly's situation is unique. Losing the fast-growing TikTok app as a partner does make it less attractive, but Fastly is not half the company it was three weeks ago.
NextEra Energy
Investors hungry for dividend income might not have NextEra Energy high on their shopping list. Its current yield of 1.8% is pedestrian in the universe of utility stocks. But the Florida power specialist has a lot going for it, and not just because it's in a state with a growing population.
NextEra Energy is the country's largest generator of renewable wind and solar energy, so it's already positioned to cash in on cleaner energy initiatives. With 25 years of payout hikes, investors are confident that the distributions will keep growing. Wall Street pros see earnings climbing at an annualized 8% clip through the next few years, giving it some more growth upside than your typical sleepy utility. The stock has already run up quite a bit this year (and that does make me somewhat nervous given the slow-growth nature of the industry), but in this low interest rate environment, it's a risk I'm willing to take.
