President Joe Biden took office with less than ideal economic conditions. Nevertheless, one of the most robust bull markets in history might take shape under his administration.
Even with the pandemic ongoing, a confluence of catalysts have emerged that could propel stock prices much higher. This includes the Federal Reserve's dovish monetary policy, its monthly bond-buying program designed to weigh on long-term Treasury yields, and the Biden administration's pushing of multiple rounds of spending and/or stimulus. Ultimately, my own projection of the S&P 500 hitting 5,000 under Biden may prove conservative.
The best way for investors to take advantage of a possible Biden bull market is to pack their portfolio with invincible stocks. These are companies that, through thick and thin, have the innovation or industry dominance to thrive. The following five companies fit the bill of invincibility perfectly.
The healthcare sector is chocked full of innovation, but nothing says "invincible" quite like Intuitive Surgical's (ISRG -1.91%) dominance of the robotic-assisted surgical space. Through the end of 2020, the company had installed almost 6,000 of its soft tissue surgical systems worldwide. Comparatively, its competitors aren't even close to this figure on a combined basis. The rapport the company has built up within the medical community is invaluable and virtually ensures its customers stay loyal for a very long time.
What's even more impressive about Intuitive Surgical is the company's operating model. In its early years, most of its revenue was derived from selling its costly da Vinci system. The only issue is the da Vinci system is costly to build, so its margins are mediocre. But over time, more and more revenue has been generated from selling instruments and accessories with each procedure, as well as from servicing its systems. Since both of these segments produce much higher margins, the more da Vinci systems Intuitive Surgical installs, the quicker its operating margin will grow.
Also, understand that da Vinci's runway is still enormous. Even though it controls the lion's share of urology and gynecology procedures, it has plenty of potential to gobble up surgical share in colorectal, thoracic, and general soft tissue procedures this decade.
Cybersecurity may very well be the most surefire growth trend under the Biden administration. Even with the pandemic is over, the need to protect enterprise and customer data will continue to grow, placing the onus of this protection on third-party providers like CrowdStrike Holdings (CRWD -0.70%).
What makes CrowdStrike such a special cybersecurity stock is the company's cloud-native Falcon platform. Built entirely in the cloud and utilizing artificial intelligence to grow smarter over time, Falcon oversees more than 5 trillion events each week, according to the company. Being able to quickly and effectively recognize threats usually makes Falcon a more cost-effective security platform than on-premises solutions.
Best of all, CrowdStrike has demonstrated time and again that its security solutions can easily scale with its customers. In less than four years, the percentage of customers with four or more cloud module subscriptions has risen from 9% to 63%. With the company bringing in a subscription gross margin of 79% -- it's hit its long-term subscription gross margin target early in its growth cycle -- these subscription add-ons from existing clients are absolute gravy to CrowdStrike's bottom line.
Another invincible stock that stands to benefit in a big way from a strong economy under the Biden administration is payments giant Visa (V 0.33%).
If you're a long-term investor, the investment thesis for Visa is pretty simple to understand. Though recessions and contractions are an inevitable part of the economic cycle, they typically only last a few months or a couple of quarters. By comparison, periods of economic expansion are measured in years. With Visa's revenue based on consumer and enterprise spending, it benefits for long periods of time and struggles for much shorter spans. It's a numbers game that very much favors patient investors.
As I've previously noted, Visa chooses not to lend. Although lending could allow the company to double-up its income sources during economic expansions, it would also expose Visa to credit delinquencies during contractions and recessions. Not having to set aside cash during recessions is precisely why it bounces back quicker than most financial services companies.
Also, with 53% share of credit card network purchase volume in the U.S. (as of 2018), Visa is ready to take full advantage of a post-pandemic rebound.
Zoom Video Communications
Coronavirus pandemic superstar Zoom Video Communications (ZM -3.57%) is another company with unstoppable qualities that should thrive under the Biden administration.
As you can imagine, the pandemic closing workspaces rolled out the red carpet for Zoom's cloud-based Web conferencing platform. Zoom was able to effectively use its freemium model to tease the product to small-and-medium-sized businesses during the pandemic, many of which eventually signed up for the paid service after seeing the value it could add.
In just one year, the company saw a 470% increase in the numbers of customers with at least 10 employees. That compares to a 156% increase in customers contributing at least $100,000 in annual recurring revenue. Though Zoom is doing very well with bigger businesses, it's really resonating with small-and-medium-sized companies.
It's also the clear dominant force in U.S. Web conferencing. One year ago, it held almost a 43% share of the U.S. Web conferencing market, which was approximately 24 percentage points higher than its next-closest competitor. With the value of Zoom's solutions readily apparent, it's a likely candidate to benefit from a Biden bull market.
Just how dominant is Amazon in online retail? According to a report put out by eMarketer in March 2020, Amazon was on track to hit a 39.7% share of the U.S. e-commerce market in 2021. Effectively, $0.40 of every $1 spent online in the U.S., the largest economy in the world by gross domestic product, routs through Amazon's marketplace.
But here's the thing: retail margins are usually razor thin. To counter this, Amazon has used its online dominance to court more than 150 million people worldwide to sign up for a Prime membership. The annual fees collected from Prime help the company undercut brick-and-mortar retailers on price. It also doesn't hurt that when consumers pay for a membership, they're more likely to spend more and stay loyal to Amazon's ecosystem of products and services.
However, the bigger growth story over the next four years might just be Amazon Web Services (AWS). Amazon's cloud infrastructure service provider grew sales by a hearty 30% last year and accounted for 59% of operating income despite only generating around 12% of total sales. AWS should continue to see significant growth as businesses push online and into the cloud. That makes AWS Amazon's cash cow in the years to come.