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Here's My Top Stock to Buy in February

By Anders Bylund - Jan 30, 2021 at 11:51AM

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This provider of freelancer services is only getting started on a very long and exciting growth story.

I don't know if I've ever seen a market environment that was less suited for making long-term investments than this one. The S&P 500 market tracker has gained more than 37% since the start of 2020, despite the terrible human and economic costs of the COVID-19 pandemic. I think there's a reckoning on the way, and it won't be pretty. Most of my best investing ideas will probably be a lot cheaper in a couple of months, unless the market continues to strut higher with no regard for valuation ratios and business fundamentals.

That being said, there is one stock that I found myself drooling over even under these difficult market conditions. It took some doing because of our strict disclosure policy, but I finally picked up a few shares last week, and I expect this stock to do wonders for my portfolio in the long run.

Here's why I am that excited about Fiverr International (FVRR 7.97%) right now.

In an otherwise dark cave, a single ray of sunlight shines on a treasure chest overflowing with riches.

Image source: Getty Images.

What makes Fiverr so special?

At first glance, Fiverr might strike you as just another overvalued growth stock that got ahead of itself in 2020. The freelance marketplace operator's stock rose 750% over the last year and trades at ultra-rich valuation ratios, such as 924 times free cash flows and 290 times forward earnings estimates.

But skipping over Fiverr for these seemingly solid reasons would be a terrible mistake.

This is a key player in the rapidly evolving gig economy. Fiverr helps freelancers find jobs, and also helps both companies and other ordinary people find the right freelancer to get things done. Fiverr's management estimates that the company's addressable freelancer market is worth more than $100 billion per year, and the market itself is expanding rapidly. Lots of people found themselves with a lot of free time on their hands during last year's coronavirus lockdowns, turning ordinary nine-to-five workers into part-time freelancers. Some people either lost or quit their old day jobs, having replaced them entirely with a steady stream of freelance work.

That was no flash in the pan but the start of a long-lasting culture change. Freelance work is becoming a mainstream idea, much like working from home or subscribing to video-streaming services instead of cable TV. Fiverr is primed to carve out a position of leadership in this important sector.

A smiling woman grabs hundred-dollar bills flying all around her.

Image source: Getty Images.

Long-term growth

Fiverr has barely scratched the surface of that $100 billion domestic target market, collecting just $163 million of top-line sales over the last four quarters. That leaves an enormous amount of unexplored market space and a long runway of sustained business growth. Moreover, there's a great big world of additional opportunity beyond the American borders.

Nobody else is doing it quite like Fiverr. Here's how the company's sales growth measures up to two other leading gig economy specialists: ride-sharing veteran Uber (UBER 2.47%) and fellow wrangler of freelance services Upwork (UPWK 7.35%). I know which one I would rather have in my high-growth stock portfolio:

FVRR Revenue (TTM) Chart

FVRR Revenue (TTM) data by YCharts

Fiverr may look small and expensive, but the company will show explosive growth for years to come -- and you get what you pay for. This stock is worth every penny of that high-growth premium, and if Fiverr shares drop during the next market correction, I'll just shrug my shoulders and buy some more. This company actually thrives under lockdowns and economic strife.

I'm currently holding my horses on making new investments in general but simply couldn't wait to pick up some Fiverr shares right away.

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Stocks Mentioned

Fiverr International Ltd. Stock Quote
Fiverr International Ltd.
$42.95 (7.97%) $3.17
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
$23.67 (2.47%) $0.57
Upwork Inc. Stock Quote
Upwork Inc.
$18.99 (7.35%) $1.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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