With Stocks at All-Time Highs, 3 Stocks to Buy Without Hesitation

The market has been flirting with all-time highs this past week. Even though this is exciting for investors, it may keep many on the sidelines from buying or adding to great stocks. With this dilemma as a backdrop, we asked three Motley Fool contributors to highlight one company that they'd buy without hesitation regardless of the market highs. 

They came up with Upstart Holdings (UPST 0.79%), Qualcomm (QCOM 1.41%), and Atlassian (TEAM -0.22%).

Image source: Getty Images.

Upstart Holdings: Disrupting loan approvals with AI

Danny Vena (Upstart Holdings): Consumer lending has long been ripe for disruption. Those without less-than-perfect credit scores are at the mercy of lenders, subjected to ridiculously high interest rates -- if they could get loans at all. Even worse, some consumers have low credit scores through no fault of their own, the result of broken relationships, medical issues, or simply no credit history. That's where Upstart Holdings comes in.

The fintech company offers an alternative to the rules-based lending systems used by many banks and financial institutions. Rather than considering just a few variables, Upstart uses a novel approach, leveraging the power of artificial intelligence (AI) to consider more than 1,000 variables to predict the likelihood that a loan will be repaid. The company's sophisticated algorithms turn traditional lending on its head, bringing many more would-be loan recipients into the fold, while also providing lower rates than many of these credit-challenged borrowers could receive elsewhere. 

Upstart's state-of-the-art platform includes a laundry list of factors to predict loan defaults, including income fraud, loan stacking, fee optimization, identity fraud, acquisition targeting, prepayment prediction, and time-delimited default prediction -- among many other indicators. Upstart's system grows smarter with each passing loan, and with a rapidly growing dataset which includes more than 10.5 million repayments to consider, its predictive power continues to expand.

Consumers are much more likely to get a loan using Upstart's financial modeling, with 27% more borrowers getting loans from banks using its system than those using traditional lending methods. Not only that, they generally get better rates, with a 16% lower annual percentage rate (APR), on average, for approved loans.  

None of that would matter if the loans weren't paid back, but financial institutions using Upstart's platform have lowered their loss rates by 75%, with the same number of loan approvals. That shows that the AI-based system works and banks are increasingly climbing aboard.

Upstart's revenue grew to $194 million in the second quarter, up 1,018% year over year. The company swung from a loss to a profit, with net income of $37.3 million, compared to a loss of $6.2 million in the prior-year quarter. Perhaps as importantly, Upstart has generated a profit in each and every quarter since the company's IPO late last year.

Robust customer measures helped drive Upstart's financial results. Bankers using Upstart's system originated $2.8 billion from 286,864 loans, up 1,605% year over year, while conversion improved to 24%, up from its previous level of 9%.

Upstart is chasing a massive total addressable market of $92 billion in unsecured loans, but it doesn't end there. The company is expanding its tools to address the auto loan, credit card, and mortgage loan markets, expanding its opportunity to $4.3 trillion. To put that in context, Upstart is guiding for revenue of $750 million this year, which helps illustrate the magnitude of the opportunity. 

Image source: Getty Images.

Qualcomm: An upgrade cycle lifts this dominant 5G chipset company

Will Healy (Qualcomm): Qualcomm's portfolio of wireless patents has made it an industry powerhouse. It creates chips for a diverse array of wireless products and may build a new operating system for cars.

However, many investors associate it with its chipsets for smartphones, a market that has become increasingly significant amid a 5G upgrade. Although companies such as Apple have tried to compete, for now, every 5G device depends on a Qualcomm chip to provide this service. This bodes well for Qualcomm as Grand View Research predicts this chipset market will grow at a 69% compound annual growth rate through 2028.

Also, the company continues to fend off challenges. Qualcomm depends heavily on chips from Arm Holdings, a company Nvidia is in talks to buy. Still, with regulators raising antitrust concerns about such a takeover, Qualcomm appears increasingly likely to avoid becoming dependent on Nvidia.

Qualcomm's strength shows up well in its newly released earnings for fiscal 2021. Over that period, revenue of almost $34 billion, according to generally accepted accounting principles (GAAP), surged 43% compared with fiscal 2020. Revenue growth stayed slightly ahead of the increase in operating expenses, and Qualcomm benefited from additional investment income and lower interest costs. This resulted in GAAP net income of $9 billion for the fiscal year, a 74% year-over-year increase.

Also, slowing growth may not affect Qualcomm as much as it might appear. GAAP revenue increases in the fiscal fourth quarter slowed to 12%, but revenue grew 43% if excluding a $1.8 billion settlement with Huawei in Q4 2020. Still, the $10 billion to $10.8 billion the company predicted for the first quarter of 2022 represents a 26% increase year over year at the midpoint, so Qualcomm will likely face slowing increases for a time.

However, while the stock trades at approximately the same level as one year ago, it has risen by about 20% since hitting a near-term low in mid-October. Additionally, at a P/E ratio of only 17, it remains significantly cheaper than peers such as Apple at a 27 earnings multiple, or NXP Semiconductor at a 59 P/E ratio. As Qualcomm dodges yet another competitive threat, its integral role in the 5G upgrade cycle and the low earnings multiple could make it increasingly attractive.

Image source: Getty Images.

Atlassian: Team collaboration won't ever go out of style

Brian Withers (Atlassian): Projects don't get done these days without good collaboration between team members. With remote work and a growing trend of workers with specialized skill sets, teams are challenged today to keep everyone in the loop to execute critical projects. Software tools are becoming a must-have in today's business world to coordinate teams that could work from just about anywhere. This is where Atlassian shines. Its mission is to help teams around the world unleash their potential. With its focused mission, exceptional business metrics, and a world of opportunity ahead, this company is a solid bet no matter what the market is doing. 

First, let's dive into the company's latest results. Customers are flocking to Altassian's broad platform of software tools. The company hit a record high of 216,500 customers for the quarter, a 30% increase from the previous year. Revenue is also at record levels with $614 million in its most recent quarter, which is a sequential 10% increase and 33% improvement from the previous year. Lastly, as the company is moving customers to its cloud-based tools, it's exciting for investors to see the growth of its cloud offerings accelerate.

Data source: Company earnings release. QOQ = quarter over quarter. YOY = year over year.

These results are stellar, but investors are always looking forward to what's next. Atlassian is well prepared to grow in three focused areas. The first is agile development, which is built on the company's foundations of collaboration tools for software development teams. With the boom in software development, this area will continue to be a rich source of growth for years to come.

The second area of growth is helping information technology (IT) teams support the software they release. With work-from-anywhere situations becoming the norm, users are demanding access to critical software tools whenever and wherever they work. With Atlassian's Jira Service management and Halp, IT teams have all the tools they need to take care of heightened user demand. Work management tools are the third source of growth for the company. These products help teams in all functions juggle tasks and collaborate to deliver on their team's goals.

Atlassian's stock has had a tremendous run and more than doubled in the past 12 months. But investors haven't missed the boat. This mission-focused founder-led team collaboration software specialist is one stock I'd buy without hesitation in any market.