I went out to pick some nice things for my portfolio earlier this week. I added to my NextEra Energy (NYSE:NEE) position on Monday. I also made my first investments in Coinbase Global (NASDAQ:COIN) and Starbucks (NASDAQ:SBUX).
These three stocks don't have a lot in common. Let's dive into why I filled some buy orders on Coinbase, NextEra Energy, and Starbucks on Monday.
It's been a rough few weeks for the cryptocurrency market, and things have also been a little choppy for the leading trading platform of these high-tech digital currencies. Coinbase hit the market at a reference price of $250 two months ago. It would go on to hit a high of nearly $430 on its first day of trading, but now it's back below its reference price.
With most crypto denominations falling sharply over the past month it's easy to see why a dedicated exchange would suffer. However, I like Coinbase as a way to play both the widening basket of cryptocurrencies and the increase in investor interest and trading volume that should surpass any bet on a single denomination.
The appeal of Coinbase is massive. It had 56 million verified user accounts by the end of this year's first quarter, completing $335 billion in trades through just the first three months of the year. Crypto bears argue that there is no tangible way to value the different currencies, but there are real numbers to the business of Coinbase. It generated a whopping $771.5 million in net income and $1.12 billion in adjusted EBITDA in the first quarter, placing it on an annualized run rate of less than 20 times trailing earnings and 14 times adjusted EBITDA. This isn't too shabby for a company that just posted an 845% surge in revenue with earnings growing even faster in its latest quarter. Obviously trading volume will slow if interest in crypto starts to sputter, and given its relatively high fees it's not as if it's immune to challengers that will emerge if cryptocurrency expands its audience. I still like Coinbase as smart play on the disruptive financial shift to digital currencies.
2. NextEra Energy
I initiated a position in NextEra Energy in late October of last year, and frankly I was surprised to be able to add to that position at roughly the same price of my first purchase. NextEra Energy is a leading electric utility, but it's also the country's leader in generating renewable wind and solar energy. With President Joe Biden making green energy a priority it would seem that NextEra Energy would be a logical beneficiary after his election a week after my initial investment.
Investors have also flocked to stocks that generate dividend income. NextEra Energy's 2.1% yield isn't as exciting as what you may find in most real estate investment trusts, master limited partnerships, or even fellow utility stocks -- but it's substantially more than what you can get at the bank these days. Next Era Energy has boosted its dividend for 26 consecutive years, and its Florida stronghold makes it a smart play on a state where a lot of people are heading to now.
We're talking about steady but modest growth here. NextEra Energy sees earnings per share rising 6% to 8% through these next three years. This should keep the payouts also climbing, and I doubt I will find the stock still marching in place eight months from now.
The Starbucks story is well known by now, and it's almost embarrassing to tell the origin story of my new position in the java giant. I spent a few hours working out of a Starbucks in Central Florida on Monday, and I noticed that the drive-thru lane was slammed with cars even as the breakfast crowd moved on to early afternoon. I have been a lead analyst and part of the analyst team of newsletter services that have recommended Starbucks in the past, and it was long overdue for the baron of baristas to have a place in my own portfolio.
Starbucks was a funny beast during the pandemic. Naturally the number of orders shrank as folks weren't commuting to work or out in social settings, but between takeout and the boom in third-party delivery services Starbucks experienced a dramatic spike in the average transaction per order. We didn't want to let our love of Starbucks go during the lull, and that's going to make even Starbucks more popular now as the economy starts up its engine again as we drive out of the COVID-19 crisis. I should've caffeinated my portfolio with Starbucks ages ago, but it's never too late to take a first sip of Starbucks.