The wait might soon be over. Following five months of heated negotiations between the Democrat-led House of Representatives and Republican-controlled Senate, the two sides have agreed on a $900 billion package to support American workers and reignite economic growth. While Trump could still torpedo the bill, the stimulus seems close.
The nearly 5,600-page bill adds $284 billion in Paycheck Protection Program loans, provides $300 extra in weekly federal unemployment insurance through mid-March, and doles out $8 billion for the distribution of coronavirus disease 2019 (COVID-19) vaccines. The headline number that will directly affect the pocketbooks of more than 150 million Americans is the up to $600 stimulus check headed their way. This is half the amount per qualified individual approved under the CARES Act.
For some Americans, this $600 payout represents a lifeline to pay bills or put food on the table. For others, it's extra money that could be put to work in the greatest wealth creator on the planet: the stock market.
If you fall into the latter category, here are three top stocks to buy with your $600 stimulus payout.
Bank of America
Bank stocks probably aren't anywhere near the top of investors' buy lists right now -- but they should be. Banks are money machines, and buying into the industry during recessions has historically been a smart move. That's why stimulus check recipients should consider putting their money to work in Bank of America ( BAC 0.64% ).
The Bank of America you see today is nothing like the BofA that scraped by during the financial crisis more than a decade ago. The quality of its loan portfolio has vastly improved, and it has plenty of available liquidity to survive the economic shocks associated with a recession.
Bank of America stands out for its interest sensitivity. Among big banks, none is more interest sensitive than BofA. While the Federal Reserve has pledged to keep its fed funds rate at or near historic lows through 2023, the thinking here is that BofA is in pole position to see a rapid expansion of its interest income by mid-decade.
Bank of America's ongoing efforts to improve its operating efficiency are also noteworthy. With increased digital and mobile banking use by its customers, BofA has been able to consolidate some of its branches to lower its noninterest expenses.
As one final note, the nation's central bank gave big bank stocks the all-clear to resume share repurchases, with some limitations. Prior to the COVID-19 pandemic, BofA had approved capital return programs of $26 billion and $37 billion. While we're unlikely to see figures this robust in 2021, Bank of America is clearly looking out for its shareholders.
Teladoc is a leading provider of telehealth services in the United States. As you can imagine, it's benefited from the coronavirus pandemic. Physicians want to keep potentially infected people and at-risk patients out of their offices when possible, so they've turned to virtual checkups and consultations. Teladoc's virtual visit count has more than tripled in each of the previous two quarters from the equivalent period in 2019.
However, Teladoc isn't just benefiting because of the COVID-19 pandemic. It was growing its top-line sales by an average of 74% a year between 2013 and 2019. This exceptional growth is a direct reflection of where personalized care is headed over the next decade. Telemedicine provides the patient with unparalleled convenience while also freeing up physicians to interact with more patients. Virtual visits tend to cost less than office visits for insurers as well.
Teladoc Health's growth is also going to be supercharged thanks to its acquisition of applied health signals company Livongo Health. Livongo collects data on people with chronic health conditions like diabetes. With the help of artificial intelligence, it then sends its members tips and nudges. These tips help induce lasting behavioral changes that promote healthier living.
Before closing the deal, Livongo had already turned the corner to profitability despite only securing a little over 1% of the 34.2 million addressable diabetics as members in the United States. Livongo's ability to court additional members, expand into new chronic conditions, and cross-sell its solutions with Teladoc should help the combined company deliver jaw-dropping growth potential over the next decade.
Fastly has had a wild ride in 2020. Its share price sank to the low teens in March, then topped $136 a share by October. Over the past two months, its stock has pulled back significantly, with top customer TikTok mostly to blame.
Fastly's solutions speed up and secure the content delivery process for its clients. TikTok, which has been very popular in the U.S. this year, accounted for approximately 12% of Fastly's first-half revenue. However, it was mired in a battle with the Trump administration during the third quarter, which led TikTok parent ByteDance to remove most of its traffic from Fastly's network. As a result, Fastly reduced its previously forecasted third-quarter guidance.
But if we've learned anything from this revision and Fastly's third-quarter operating results, it's that this company is about much more than just TikTok. Fastly added 96 new customers in Q3 and saw its average enterprise client up their spending by $37,000 from the sequential quarter. Most importantly, its dollar-based net expansion rate rose 10 percentage points to 147% from 137% in Q2 2020. This implies existing clients are seeing more traffic and relying even more on Fastly.
The future of U.S. business and consumption is online and in the cloud. Demand for Fastly's solutions is only going to increase in the years to come. Though it's not a cheap stock by traditional fundamental standards, it could triple sales by 2023 and double its top line many times over this decade.