The stock market went haywire in 2020 as the coronavirus pandemic turned the economy upside down. At the end of the year, the S&P 500 market barometer had recovered from the crash in March to deliver a 15% return for the year. Many investors are sitting on their hands, fearing that another crash might lower their returns on whatever they buy today -- and the cash would be better spent after the onset of the next correction, right?
A healthy respect for market risks is always good, but you can also miss out on great returns by keeping too much cash on the sidelines in your investing portfolio. The best strategy is to keep some of that dry powder handy just in case the next market correction sweeps in and creates a bunch of fantastic buying opportunities, while also investing in a few high-quality stocks that can give you great returns no matter what happens to the market as a whole.
Read on to see why you should divide your $5,000 of investable cash among Fiverr International (FVRR -2.56%), Walt Disney (DIS 0.17%), and Roku (ROKU 2.69%).
The gig economy is here to stay
Freelancer marketplace operator Fiverr is not a cheap stock after a 774% gain in 2020. At the same time, Fiverr remains a small company with a market cap of just $6.8 billion and trailing sales below $165 million. Sales nearly doubled in the third quarter and the company crushed Wall Street's financial expectations across the board. This stock trades at a premium thanks to Fiverr's proven ability to generate spectacular growth in a difficult market.
Fiverr is leading the charge to help freelancers and contractors connect with the people and businesses that need their services. More than one-quarter of American workers already do some sort of freelance work, at least as a side gig, according to a report from the Aspen Institute. For about 10% of working Americans, gig work is their primary income. But only one percent of the worker population is using online services like Fiverr or Upwork (UPWK 3.29%) to find their next assignment. The gig economy is still in its infancy.
The addressable market is huge and Fiverr's untapped growth prospects are absolutely enormous. I keep kicking myself for not buying Fiverr, and then I find myself writing another article to help you see how big the growth opportunity really is. And then I can't touch the stock for another few days, thanks to The Motley Fool's strict disclosure policy. I'll get around to it one of these days. In the meantime, nothing is stopping you from buying some Fiverr shares today.
The House of Mouse is changing with the times
Entertainment giant Walt Disney closed down its theme parks and resorts in March. At the same time, movie theaters closed their doors, and the production of new films and shows was hampered by virus-fighting guidelines and policies. Disney's stock crashed hard, and then the company made some changes to its fundamental business plan.
Disney's corporate structure was reshuffled in order to support the creation and publishing of more material on Disney's streaming media services. Disney+ reported 74 million subscribers at the end of the fourth quarter, alongside 10 million ESPN+ viewers and 37 million accounts for the more mature Hulu platform. One year earlier, Disney+ didn't exist and the other two services added up to just 32 million subscribers. The grand total of 121 million subscribers to Disney's video-streaming services is comparable to sector leader Netflix (NFLX 5.54%) customer counts in the summer of 2018. If Netflix has a legitimate challenger in the global video-streaming wars, it's definitely Disney.
That might be a scary idea for some investors, as Disney is turning away from the cinema-oriented media market that supported the company for nearly a full century. As a longtime Disney shareholder myself, I would much rather see the company embrace and dominate whatever comes next than try to defend an obsolete and dying business plan.
That's where we stand today, and Disney is a great buy today for investors with a long-term mindset.
Roku is a guaranteed winner in the cord-cutting wars
Media-streaming technology specialist Roku started off as a maker of video-streaming set-top boxes for Netflix's digital services. Later it expanded its horizons to become a leading hardware supplier for every video or music streaming platform worth mentioning. Now, Roku is leaning away from low-margin hardware sales to focus on selling time-tested streaming software to makers of smart TV sets and other devices capable of sending media streams to the biggest screens in your house.
Roku is the Switzerland or Sweden of the media-streaming wars. It doesn't really matter which streaming services find the largest audience over time because Roku supports all of them. We aren't there quite yet, but the company is building a position where the holdouts and the skeptics soon won't be able to ignore Roku's dominant platform -- and I'm talking about both streaming services and device builders here.
This is the stock to buy if you want to invest in the explosive growth of media-streaming services around the world, but you're not yet ready to pick winners among the growing plethora of online video services. Roku wins when the market itself expands, and it doesn't really matter whether or not Netflix can stave off Disney's challenge in the long run.
That's why Roku is the smart nuts-and-bolts play on the rapidly evolving media market. You can swallow the 153% price jump in 2020 and buy it today, or you can regret the missed opportunity for years to come.