Investing isn't just about digging into financial statements and searching for great business models. It also involves looking at trends in human behavior that may fuel the growth of companies or entire sectors. The COVID-19 pandemic has accelerated and intensified numerous shifts in people's habits that were already underway prior to the crisis. Many of these changes will remain imprinted in our daily routines even after the threat of the coronavirus has largely abated.
Intrepid investors should always be looking out for those sustainable growth trends that are redefining how we live, work, and interact, and then attempting to gauge which players are best positioned to capitalize on those catalysts. These three stocks all look poised to ride those macro trends and enjoy years of significant growth in the process.
Image source: PayPal.
1. PayPal
PayPal (PYPL 0.34%) was already witnessing steady growth even before the pandemic, but the payments platform provider's financial metrics hit new records as large numbers of people moved more of their purchasing online amid lockdowns and social-distancing efforts.
In 2020, total payment volume (TPV) grew 31% to $936 billion -- the strongest performance in the company's history. Net revenue jumped by 22% while net income soared by 71% to $4.2 billion.
The momentum has continued this year. On May 5, PayPal reported the best first-quarter results in its history. TPV jumped by 50% year over year to $285 billion while revenue grew by 31%. The company also added 14.5 million net new active accounts, bringing its active account base to 392 million.
Many of the people who shifted their financial and shopping activity online are unlikely to fully revert to their old practices, so PayPal should enjoy a permanent uplift to its active account base. The network effect of having more merchants and customers on its platform also generates a virtuous cycle that will enable PayPal to capture more business.
The company has also jumped on the digital currency bandwagon by launching a new service last October to enable users to buy, hold and sell cryptocurrency using their PayPal accounts. This year, it expanded that initiative by allowing its U.S. customers to use those cryptocurrency holdings to pay for their purchases. Its Venmo digital wallet now permits customers to load four types of cryptocurrencies into it, further expanding the opportunities to use digital currencies in everyday transactions. Its moves to support the use of cryptocurrencies, as well as the tailwinds from the ongoing shift to e-commerce, should position PayPal for significant growth in the years ahead.
2. Beyond Meat
In part as a consequence of people becoming more health-conscious, more people are choosing to eat less meat or eschew it altogether. And with a number of better-tasting plant-based meat alternatives hitting the market in recent years, those non-meat options have enjoyed growing popularity.
Beyond Meat (BYND 0.16%) is one of the fastest-growing plant-based food companies, with products that are free from hormones, bioengineered ingredients, and cholesterol.
Image source: Beyond Meat.
The company's net revenue has grown at an astounding pace since 2016, rising 25-fold from $16.1 million back then to $406.8 million in 2020. That strong momentum has carried over into the first quarter of 2021 when Beyond Meat reported an 11% year-over-year increase in revenue to $108.2 million. If not for the pandemic adversely impacting sales in its foodservice division, the company would have reported even better growth numbers.
Beyond Meat is planning to roll out more new additions to its slate of meatless products, including a chicken substitute. That could see explosive growth, as demand for chicken has been growing since the 1940s. The company will also introduce a new iteration of its plant-based hamburger, Beyond Burger. And distribution of its new Beyond Meatballs product has been expanded to more than 2,100 Walmart stores across the U.S.
3. Crowdstrike
With the increase in mobile and cloud usage comes a need for increased digital security. Crowdstrike (CRWD -3.90%) protects its clients' networks against cyberattacks by deploying its cloud-based solution across their enterprise systems. These solutions are particularly important in this day and age when data privacy and confidentiality are major issues for corporations. Hacking has become increasingly commonplace, and even a single successful attack can result in millions of dollars in damage to a company, as well as a loss of confidence in its brand.
Crowdstrike reported sparkling results for its fiscal 2021, which ended Jan. 31. Revenue grew 84.4% to $874.7 million, and subscription revenue made up close to 92% of that total. Although the company still reported a net loss, it was smaller than the previous year's loss, and it generated $292.9 million of free cash flow, significantly better than the $12.5 million it generated in 2020.
The company looks poised for further growth, in part due to its recently completed acquisition of Humio, a provider of cloud log management and observability technology. Those new additions to its offerings will help Crowdstrike to expand its threat detection capabilities and deliver better real-time protection for its clients.
