We've finally made it to December. In 29 more days, we'll be turning the page on 2020, and I don't think too many people will be all that sad to see it leave. The coronavirus disease 2019 (COVID-19) has completely upended societal norms and disrupted the traditional work environment this year.
If there's one positive takeaway from 2020, it's that growth stocks have been virtually unstoppable -- and might stay that way for the foreseeable future. With the Federal Reserve pledging to keep lending rates at or near historic lows, high-growth companies are free to aggressively borrow and expand their operations. This makes growth stocks an excellent place to park your money for the next couple of years, and likely over the long run.
If you're a patient investor seeking game-changing returns, the following three surefire growth stocks are the perfect additions in December.
Teladoc has been a prime beneficiary of the COVID-19 pandemic. Physicians would prefer to keep potentially infected patients and those with preexisting conditions out of their offices. Care providers and their patients have thus turned to virtual visits in a big way this year. In each of the past two quarters, Teladoc's year-over-year virtual visits more than tripled.
Perhaps the best aspect of the virtual visit model is that everyone benefits. Physicians and patients have easier access to each other. Insurers appreciate the lower costs associated with virtual visits relative to in-person consultations.
Beyond just telemedicine, Teladoc also recently completed its cash-and-stock acquisition of applied health signals company Livongo Health. Livongo's solutions collect data and use artificial intelligence to send tips to patients. These nudges help users with chronic health conditions lead healthier lives. Livongo has just about doubled its year-over-year diabetes patient count for multiple years.
Teladoc should remain one of the fastest-growing healthcare stocks for a long time to come.
When you think of surefire growth stocks, you probably don't think of furniture manufacturers and retailers. However, millennial-focused modular furniture company Lovesac (LOVE 5.38%) will change investors' perceptions.
The pandemic has been bad news for virtually all furniture retailers, with showrooms closed or operating at a reduced capacity. That hasn't been the case for Lovesac, which has used its omnichannel sales strategy to its advantage. It's increased its available showroom partners, used pop-up showrooms to display its products, and most importantly, leaned on the internet to drive sales. In the fiscal second quarter, more than 65% of sales were generated online, up from 24% in all of fiscal 2020. As a whole, net sales rose almost 29% from the prior-year period, with comparable sales skyrocketing 72%.
Lovesac is seeing such robust growth because of its ability to engage with its target audience: the millennial consumer. Though its prices are high relative to other furniture options, Lovesac stands out for its eco-friendly manufacturing (e.g., yarn spun from 100% recycled plastic water bottles is used in its "sactionals") and the seemingly endless combinations that can be put together with its modular furniture. According to the company, over a third of all purchases are from repeat customers.
With Lovesac aggressively reinvesting in its omnichannel presence, innovation, and millennial engagement, it would not be surprising if the company lost money in fiscal 2021 and 2022. With double-digit growth expected for at least the next four years and the company's market cap roughly equal to Wall Street's projected full-year sales for 2024, it would seem there's still plenty of upside potential for investors to extract.
Palo Alto Networks
A third surefire growth stock investors can confidently buy in December is cybersecurity powerhouse Palo Alto Networks (PANW 2.23%).
Protecting in-house networks and enterprise cloud data is now considered essential. The COVID-19 pandemic has pushed consumers online and forced businesses to operate remotely, which means that protecting sensitive data is more important than ever. This should provide a steady level of demand and predictable cash flow for cybersecurity stocks.
On a company-specific level, Palo Alto is in the midst of a transformation from physical firewall products to firewall and cloud subscription services. This transition is an absolute no-brainer, with firewall and cloud-subscription service margins light years ahead of physical firewall products. What's more, subscriptions have a way of reducing client churn and producing predictable sales.
Another growth driver for Palo Alto Networks is the company's affinity for bolt-on acquisitions. Palo Alto is regularly acquiring smaller businesses to bolster its product offerings, complement existing solutions, and broaden its appeal to small or medium-sized businesses. Though it can take time to efficiently incorporate so many new purchases into the fold, Palo Alto is willing to forgo some of its very short-term earning potential in order to gobble up longer-term cloud market share.
Look for Palo Alto Networks to continue delivering double-digit sales growth for its shareholders.