Getting started in investing can feel overwhelming. There are so many companies and strategies to choose from and so many metrics to consider that you could be forgiven for just buying an S&P 500 index fund and moving on with your life. It's a logical approach, and ensures your returns will essentially match the market.
But if you want to try for better-than-benchmark results, you could focus on companies that are paving the way to the future. It wouldn't even take you that much money to get started: As little as $1,500 would get you one share each of Upstart (UPST +5.95%), The Trade Desk (TTD +3.16%), MongoDB (MDB +4.06%), Teladoc (TDOC +6.03%), and Axon Enterprises (AXON +2.32%). Here's why those companies would make a great foundation for an investment portfolio focused on growth.
Image source: Getty Images.
1. Upstart
Lending decisions used to be very subjective. Banks often took factors into account that didn't affect a borrower's ability to pay back a loan. In many instances, loan officers made decisions that actually excluded worthy people from getting credit. Through the years, those decisions have come to be based more on analytics and algorithms. The resulting processes are much better, but they are far from perfect.
Upstart is taking these analytics models to another level. It uses complex machine learning models crunching 1,600 variables to arrive at lending decisions, and the model is proving itself in the eyes of its banking customers and regulators. The company's second-quarter revenue was $194 million -- up more than 1,000% year over year. Even more impressively, the Consumer Financial Protection Bureau has given its version of a stamp of approval to Upstart's models.
The agency found the service was leading to a higher approval rate at lower interest rates for customers. That's a win-win-win for the company, its customers, and borrowers. Upstart has focused on personal loans, but is now moving into the much larger auto loan and home mortgage markets. The stock is up 600% this year. It could just be getting started.
2. The Trade Desk
The Trade Desk offers a self-service cloud platform for buyers of advertising to manage their digital marketing campaigns. That's a fancy way of saying its customers can create and manage their advertising in mediums like audio, video, and social media across the web, mobile, and internet-connected TVs, so that they can get the most out of their advertising dollars. Clients use The Trade Desk's services to figure out when and where to put their messages in front of prospective customers -- and then do it. The company's revenues and profits have been growing like gangbusters.
For the first six months of 2021, revenue climbed 66% year over year to $500 million. Net income was up 43%. With people spending more and more time viewing digital channels, that growth doesn't look likely to slow anytime soon -- and The Trade Desk's customers know it. Its streak of seven consecutive years of customer retention above 95% speaks to its value proposition.
The stock is up 420% in the past 3 years, but don't let that scare you. For investors starting a growth portfolio, there may not be a better way to bet on the future of entertainment than The Trade Desk.
3. MongoDB
Another company helping businesses adapt to a new landscape is MongoDB. It offers a cloud-based database supporting NoSQL (not only structured query language). It's a format that eschews the traditional tables of rows and columns. It can handle the old stuff, but it also allows customers to easily store and retrieve the flood of messy, unstructured data that comes with audio, video, and images -- the kind that we are all consuming on our mobile devices these days. Although some tech titans like Amazon have similar offerings, MongoDB is the hands-down favorite among developers.
The company's Atlas product is its crown jewel. It's a fully managed service and innovation is helping accelerate its growth. While the overall top line grew 41% in the first six months of 2021, revenue was up 83% for Atlas. The product now accounts for 56% of all revenue. That bodes well for the future, and Wall Street knows it.
MongoDB's share price is up 84% since mid-May, but that's no reason to avoid the stock. The company's sales in the past 12 months were $702 million. Compare that to its estimated market opportunity of $22 billion by 2026 and the potential is obvious.
4. Teladoc
This stock experienced a meteoric rise earlier in the pandemic, climbing almost 160% in the 12-month period that ran through the end of January 2021. However, from its peak early this year, it's now down by about 51%. That doesn't reflect the company's progress toward creating a virtual healthcare system.
Management has made bold acquisitions that put the company at the center of chronic disease management -- the largest expense category in the U.S. healthcare system -- and pieced together an offering that appeals to insurers and hospital systems alike. Membership growth has slowed this year after a 2020 in which many many organizations were searching for virtual healthcare solutions for their employees. CEO Jason Gorevik expects the pace to pick back up in the years ahead. Still, adding members isn't the only way this company can grow.
By adding new services, Teladoc has been able to drive the price paid per member up significantly. In fact, it was 142% higher in the second quarter than it was a year earlier. In a related note, it recently reported that 75% of its deals are now for more than one product.
For the next few years, Teladoc should see significant tailwinds both from the global pandemic and from political efforts to improve the U.S. healthcare system. As it continues to prove the value of its platform, expect healthcare plans offering virtual options to become the norm rather than the exception. That should eventually benefit Teladoc's shareholders.
5. Axon Enterprise
You might know Axon Enterprises by its former name -- Taser International. It still makes non-lethal electric shock weapons, but its future is now tied more to evidence.com -- a software platform used by police departments to store and manage the footage captured by Axon's body and patrol car cameras.
The company is continuing to innovate and expand its offerings. Its recently released dash camera uses artificial intelligence to scan license plates across multiple lanes of traffic. It also upgraded its virtual reality simulator. The program is now wireless and offers modules to help officers learn how to deal with complex situations like domestic violence. It also contains modules to identify and engage with citizens who are hard of hearing, as well as those with schizophrenia, autism, dementia, and other conditions like post-traumatic stress disorder.
Axon also continues to expand globally. In 2020, 16% of its revenue came from outside the U.S. In the most recent quarter, management cited momentum in the Asia Pacific and Latin American markets as key growth drivers. This highlights the opportunity that lies ahead.
Another indication about where Axon is headed is how much business it already has locked in. The company has put up $806 million in revenue over the past 12 months, but has another $2 billion under contract for the future. That contracted number is 52% higher than it was at this time last year. It's just another reason I think Axon is a great stock to buy if you're crafting a high-growth portfolio.
