If you're a bit perplexed by the state of the stock market lately, you're not alone. The market continues to fluctuate in extremes. Recent months have produced multiple days of record highs. At the same time, an increasingly common pattern has emerged in which many popular pandemic stocks have retreated to lower (and, some would argue, more reasonably valued) price points.
All of this is to be expected in the cyclical environment in which the stock market operates. And at the end of the day, maintaining a long-term, diversified investment strategy is the best way to ensure your portfolio consistently produces growth in all kinds of market environments. On that note, let's take a look at two revolutionary stocks from two very different sectors that have what it takes to generate market-beating returns for shareholders over the long term.
1. Green Thumb Industries
The marijuana space isn't always an easy sector to invest in. The truth is, companies in the cannabis industry are frequently known to exhibit a higher degree of volatility and struggle more with profitability than other stocks. However, not all pot stocks are created equal, and Green Thumb Industries (GTBIF 2.12%) is a prime example.
The company currently has 56 retail locations and 13 manufacturing facilities in operation across the U.S. Green Thumb Industries also holds licenses for 97 retail stores, and is rapidly expanding its national footprint. In addition to its impressive retail presence in key markets ranging from to Illinois to Nevada, the company owns a family of brands that sell everything from cannabidiol (CBD)-based skincare to medical cannabis products.
While some cannabis stocks floundered during the pandemic, Green Thumb Industries has delivered both remarkable share and balance sheet growth throughout this period. Shares have surged roughly 420% over the last 12 months alone.
The company reported record financial performance in 2020, during which time its revenues grew 157% and adjusted operating EBITDA (earnings before interest, taxes, depreciation, and amortization) spiked 547% from 2019. Notably, Green Thumb's bottom line turned positive in 2020, with the company reporting net income of $15 million as opposed to its net losses of $59 million the previous year.
Green Thumb Industries also closed 2020 with a stronghold of cash at its disposal. It reported cash and cash equivalents to the tune of $84 million in its full-year report, and just $342,000 in debt due within this next year.
Amidst the economic recession and in a time where many cannabis retailers have been forced into extended closures under lockdown orders, Green Thumb Industries has proven itself a force to be reckoned with. The company's ability to substantially grow both its top and bottom lines, and continually expand its retail presence in this challenging climate, is an excellent sign for its future continued growth and makes the cannabis stock a compelling buy in any market scenario.
Society is constantly evolving toward an increasingly digital future, and there are few sectors where this trend is more apparent than in the world of online payments. Square (SQ -2.64%) is an increasingly dominant figure in this space.
The large-cap company's services can be divided into two primary categories -- its Seller ecosystem and its Cash App ecosystem. Square's Seller ecosystem encompasses a laundry list of point-of-sale (POS) solutions for all types of businesses, from brick-and-mortar retailers to virtual sellers to restaurants. Merchants can use Square's platform to accept remote, manual, in-person, and online payments with access to dashboard analytics, inventory synchronization, and other key metrics.
Square also sells a variety of POS hardware devices, including a contactless chip card reader, an all-in-one credit card machine called the Square Terminal, and USB accessories including a cash drawer and receipt printer.
Square's Cash App ecosystem is a peer-to-peer platform that operates on a different side of the digital payments sphere. This ecosystem features a broad variety of capabilities. Users can leverage the mobile payment services to do everything from sending and receiving funds to accessing paychecks to buying and selling stocks.
Square has demonstrated a clear ability to capitalize on a variety of industries from e-commerce to the fast-growing digital payments market. As such, it's not surprising that the financial technology stock's balance sheet -- and its share price -- have both erupted over the past year. Square's gross profits surged 45% in 2020, while its Cash App and Seller ecosystems generated respective gross profit increases of 168% and 8%.
There's no denying that Square's Cash App is the key impetus to its ongoing growth story. As of December, Cash App had reached a record 36 million monthly transacting active customers, a 50% increase compared to the same month in 2019. Analysts project that the company can keep delivering annual earnings growth in the mid-double-digits for the next five years alone.
The stock has also risen 320% over the past 12 months and is currently trading at a lofty 670 times trailing earnings. Admittedly, this valuation is steep. But Square's robust balance sheet, ongoing growth potential, and clear competitive advantage in all market environments appear to be virtually limitless, which explains why investors have been rushing in droves to buy up shares of the stock. Long-term investors searching for a stellar company they can buy and hold for decades to come would be wise to do the same.