Have $10,000 to invest from your savings, stimulus checks, or some other windfall? There's no time like the present to put money to work, especially right now as the economy slowly rebounds from COVID-19 and technology reshapes the business world. After padding your emergency fund and paying off high interest rate debt, investing what's left over in some individual stocks with great long-term potential can really pay off down the road. Three that top my list right now are NVIDIA (NVDA -2.50%), STORE Capital (STOR -0.11%), and Teladoc Health (TDOC -5.54%).
A tech pioneer with an ambitious plan
Graphics processing unit (GPU) pioneer NVIDIA is one of those companies the average consumer knows little about but benefits from more often than they realize. Long gone are the days when the GPU was just for high-end video game graphics. NVIDIA is applying its hardware to all sorts of industries from healthcare to autos -- especially by powering cloud computing services with its data center equipment.
Key to NVIDIA's success in recent years is its work in artificial intelligence. GPUs are ideal for handling data-intensive AI and machine learning tasks. They also use less power than chips traditionally installed in data centers, helping operators not just accelerate computing power but also reduce operating costs over time. As a result, NVIDIA is at the start of a massive upgrade cycle that could keep it in growth mode for many years.
Additionally, NVIDIA has an ambitious plan to bring AI out of data centers and power devices themselves with higher-order computing. Its pending acquisition of ARM Holdings could supercharge this effort. NVIDIA on its own is already a big business with about 2 million developers around the globe making use of its systems. But the addition of ARM would bring in some 13 million more developers utilizing its ecosystem of hardware and software. If the deal passes regulator scrutiny (and NVIDIA is confident it will), it plans to bring new chip options to market powering everything from PCs to network infrastructure to robotics -- all with new AI capabilities built in.
At well over 70 times trailing 12-month free cash flow, this is no cheap stock. However, NVIDIA is growing both its top and bottom lines by double-digit percentages and showing no sign of slowing any time soon. If you have a decade to wait, this is a top way to play the future of technology and computing power.
A bet on a rebalancing economy
Economic lockdowns, social distancing, and remote work sent tech stocks soaring last year -- and banished non-tech to the basement. But as the economy starts to gradually reopen, some especially resilient businesses are emerging and are worth scooping up before they start lapping depressed financial results from a year ago.
One such resilient play is real estate investment trust (REIT) STORE Capital. The company owns over 2,600 single-tenant commercial properties across the U.S. with tenants ranging from restaurants to early childhood education centers to auto repair shops. Rent collections took a steep plunge last spring but were back to a 93% collection rate as of February 2021, with the remaining rent deferred with interest. As a result of its quick rebound and continued expansion of its portfolio of property, this REIT's revenue actually increased 4% year over year in 2020 and adjusted funds from operations (AFFO, the equivalent of earnings for a real estate firm) declined only 8%.
Granted, there are still challenges ahead for STORE. Some of its tenants (like a handful of movie theaters, for example) are still floundering and have uncertain futures. However, the company has already demonstrated its ability to roll with the punches should some of the businesses that occupy its buildings fold. Last spring it was able to quickly find a new tenant when a furniture store in the Midwest went under. STORE has plenty of liquidity at its disposal to weather further disruption, but as the economy progressively improves, the likelihood of mass bankruptcies impacting its properties is looking less likely.
As it begins to lap the initial effects of the pandemic this year, STORE is poised for some dramatic year-over-year revenue and profit expansion. And at just 19 times trailing 12-month AFFO, shares look like a long-term value. Oh, and don't forget the dividend along the way. STORE is currently yielding 4.2% annually as of this writing. For an investment betting on a comeback for non-tech stocks and a well-covered and rising income stream, this REIT is surely worth a look.
Virtual and connected healthcare are the future
While some non-tech corners of the stock market have been rallying on economic reopening hopes, some areas of tech have been getting clobbered on fears their progress during the pandemic would be undone. Enter Teladoc Health, the pioneer of healthcare delivered via phone or video conference. The stock endured a 40% drop from all-time highs in March during the tech stock sell-off, bringing it back to a reasonable valuation for those looking at its potential in the next decade.
Teladoc was a promising and fast-growing business before COVID-19, but lockdowns made virtual visits with healthcare professionals a nearly overnight necessity. Total visits and sessions enabled by Teladoc surged 156% in 2020 to 10.6 million. No repeat of that performance is being forecast for 2021, but telehealth isn't going away either. The company expects total visits to increase again to 12 million to 13 million in 2021.
Nevertheless, besides growth moderating, Teladoc's competition has also increased. Lots of other healthcare technologists and providers have entered the fray to take advantage of new health consumer trends, and there's worry this could further erode Teladoc's growth story. But this health tech company gave a huge boost to its platform with the acquisition of connected care provider Livongo Health last autumn, adding digital monitoring and coaching for chronic conditions like diabetes and hypertension into the mix. This not only strengthens Teladoc's offering against its upstart peers but also provides it a promising new arena in which to continue its expansion into the massive global healthcare industry.
As a result, the company says its revenue will increase at least 78% in 2021 to $1.95 billion and its adjusted EBITDA will at least double to $255 million. That values Teladoc shares at about 14 times expected 2021 sales -- not bad for a high-growth name in the health tech space. If you think reliance on virtual and digitally connected care will increase in the years ahead, Teladoc is worth a buy and hold for the long term right now.