Investing in the age of the coronavirus disease 2019 (COVID-19) pandemic hasn't been easy. Last year, the benchmark S&P 500 registered its fastest bear market nosedive in history, with the CBOE Volatility Index climbing to an all-time high in March.
But if there was one clear bright spot, it was the overwhelming outperformance of growth stocks. The prospect of persistently low lending rates, coupled with ongoing fiscal stimulus from Washington, has created a perfect environment for growth stocks to flourish.
Of course, not all growth stocks are created equal. If you have money just waiting to be put to work in the market, you'll want to seek out unstoppable growth stocks that have clear-cut competitive and innovative advantages. That's why the following four companies are worth investing in right now.
Intuitive Surgical is best known for developing the da Vinci surgical system, which is used in hospitals and surgical centers in place of laparoscopic surgeries to make more precise incisions in various soft tissue procedures. In 20 years, the company has installed just shy of 6,000 da Vinci systems worldwide.
That might not sound like a lot, but it's far more than all of its competitors combined. For two decades, Intuitive Surgical has been able to build up rapport with the medical community to ensure that it's the go-to assistive device for surgeons.
More importantly, the company's operating model is designed to get better with age. In its early years, most of Intuitive Surgical's sales were derived from its pricey da Vinci systems ($0.5 million to $2.5 million each). However, these are intricate systems to build, which means margins were often mediocre, at best.
Over time, the company's higher-margin operating segments -- instruments sold with each procedure and system servicing -- have become a larger portion of total sales. Thus, as more systems are installed, Intuitive Surgical's operating margins should rise.
Also, it's not just da Vinci that can drive sustainable low-double-digit growth. The launch of Ion in 2019 provides hospitals with a new and far less invasive robotic-assisted device to take lung biopsies.
The runway for robotic-assisted surgical devices is huge, and Intuitive Surgical is on the leading edge of that innovative wave.
Another unstoppable growth stock that seemingly never lets down its shareholders is payment-processor Mastercard (MA 2.25%).
Keep in mind that Mastercard isn't impervious to economic downturns and recessions. During both the Great Recession and the COVID-19-induced recession, spending by businesses and consumers dropped, as would be expected. The thing is, periods of contraction tend to be substantially shorter than the multiyear periods when the U.S. and global economy are expanding. This is a numbers game, and Mastercard finds itself on the side of overwhelmingly good odds of success.
It's also important to recognize that, unlike banks, credit unions, and even some of its processing peers, Mastercard isn't a lender. Though this might have some folks scratching their heads, given how well-known the Mastercard brand is worldwide, avoiding lending means the company has no direct ill effects during a contraction or recession. Not having to set aside capital to cover loan or credit losses is precisely how Mastercard continues to deliver a profit margin of 40% or higher.
There's plenty of opportunity for Mastercard to expand its processing infrastructure globally, too. A majority of the world's transactions are still being conducted in cash, which presumably gives the company a long runway in which to tackle underbanked regions.
For starters, CrowdStrike and the entire cybersecurity industry should benefit from the growing number of businesses pushing online and into the cloud. This was a shift we were witnessing prior to the pandemic, but it's been pushed into overdrive with consumers and enterprise clients working and shopping remotely.
The beauty of CrowdStrike's Falcon platform is twofold. First, it leans on artificial intelligence to grow smarter over time. Each week, Falcon oversees in excess of 3 trillion events, and therefore becomes more effective at recognizing potential threats to its clients' data. Secondly, having been built in the cloud, Falcon is faster at recognizing threats and can often do so for a lower aggregate cost than on-premises security solutions.
But the proof for CrowdStrike is in the proverbial pudding. Over the past 14 quarters (3.5 years), the number of clients with four or more cloud-module subscriptions has catapulted from 9% to 61%. By getting its existing clients to spend more, the company has already achieved its long-term subscription gross margin target of 75% to 80%.
What's more, its annual recurring revenue as of the end of October was $907 million. That compares to an estimated total addressable market of nearly $39 billion by 2023. CrowdStrike is just getting started.
Finally, should you want an unstoppable growth stock with its fingers in a little bit of everything, Singapore-based Sea Limited (SE 4.16%) is worth scooping up. Sea has three very different operating segments, all of which offer sustainable double-digit (or perhaps triple-digit) growth.
For the time being, the company's digital entertainment division is responsible for the bulk of its positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). As you might imagine, people being stuck in their homes due to COVID-19 has fueled gaming interest. In the September-ended quarter, active gamers grew by 78% to 572 million, with the number of quarterly paying customers more than doubling to 65 million.
However, it's Sea's online Shopee platform that's really turning heads. Investors are always on the lookout for the next Amazon, and Sea's Shopee platform really seems to be resonating with consumers in Southeastern Asia. E-commerce revenue in the third quarter was up 173%, with the gross merchandise value on its online platform doubling to $9.3 billion. This is a region of the world with a burgeoning middle class, so it's not hard to envision Shopee growing a triple-digit rate in the near term.
Lastly, Sea's digital financial-services segment is really gaining traction. Since Southeastern Asia is one of a handful of underbanked regions of the world, giving people access to digital wallets could help resolve a lot of financial-service issues.
Don't be surprised if Sea Limited doubles its sales every two or three years this decade.