Investors could have gotten whiplash watching the stock market collapse in 2020 because of the pandemic, then quickly rebound to regain all the lost ground and go on to set new record highs.
It took the S&P 500 just six months to make up all the lost ground and then gain another 41% by the end of 2021. In short, from trough to year-end peak, the broad market index put on 114%.
The S&P 500 outperformed the Dow Jones Industrial Average and the Nasdaq exchange by its widest margin in over two decades in 2021, making it only the sixth time in its history it has beaten the other indexes. Ultimately the market benchmark gained 27% in 2021, or more than double its historical average.
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If you ignore the sudden plunge the market experienced at the onset of the coronavirus pandemic last year, the stock market has been on an incredible years-long tear. The S&P 500 has quadrupled in value over that period, turning an investment of $10,000 into one worth over $43,000 today.
It shows the importance of holding on through thick and thin and letting your stocks play out over the long term. It means there's never a bad time to invest, and always having money available, even in small amounts, is a good strategy for everyone.
Of course, we know that a stock can go all the way to zero, so let's see whether this high-growth duo can continue padding their gains.
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1. CrowdStrike Holdings
Leading cybersecurity stock CrowdStrike Holdings (CRWD -3.90%) was on pace to post a banner year in 2021 until the stock broke down sharply in November and has been heading mostly lower ever since. From its high of almost $300 a share just before the collapse until today, CrowdStrike has lost a third of its value. With its drop of over 3% on the first day of trading in 2022, it may not be done falling. What gives?
First, the downdraft started because a Morgan Stanley analyst initiated coverage of the stock by saying it had an "unfavorable risk-reward ratio." What was once a cybersecurity company far ahead of the pack has seen the competition quickly catch up. SentinelOne says that in certain areas, its technology is even better and faster than CrowdStrike.
Second, CrowdStrike is not a cheap stock and rarely has been. It went public in June 2019 at $34 per share, opened for trading that first day at $63.50, and, as noted, was as high as $300. Now trading under $200, CrowdStrike still trades at more than 100 times the free cash flow it produces, so it's hardly a bargain-basement stock. Still, there is good reason to believe it can reverse course again.
Like death and taxes, it's a sure bet that hackers will continue trying to break into data systems. The need for CrowdStrike's technology is not only currently large, but quickly growing. Businesses agree and are signing up for CrowdStrike's protective services, and its subscriber base has rapidly widened from 450 clients to over 13,000 in less than five years. Almost every single client renews its subscription every year.
Its cloud-based cybersecurity solution, Falcon, is often a cheaper, more effective option to operate than on-premises security products. Through machine learning and artificial intelligence, it becomes smarter as time progresses. That enables it to recognize and respond to potential threats more quickly, overseeing approximately 6 trillion events each week.
The cybersecurity space has grown more crowded, but as the total addressable market keeps expanding, there's plenty of opportunity for CrowdStrike to keep growing on the same trajectory its business has been on for the past few years.
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2. The Trade Desk
Programmatic ad-buying platform The Trade Desk (TTD -4.34%) also ran out of steam in mid-November after spiking nearly 40% higher over two days at the start of the month when it posted third-quarter financial results that exceeded even the most bullish forecasts of Wall Street.
Unlike CrowdStrike, the ad-buying platform's gradual pullback is more likely related to the stock's meteoric jump than to any concern over its business prospects.
Revenue has surged 300% over the past four years and is up 55% to $801 million so far in 2021. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are also 39% higher over the first three quarters of 2021. The software as a service stock sits at No. 6 on Fortune magazine's list of the top-100 fastest-growing companies of 2021.
Not only is it attracting more customers to its platform, but The Trade Desk's clients are also spending more money with it than they did previously. They also keep returning to the platform, as it has a 95% customer retention rate.
What sets The Trade Desk apart from the competition is that it sells advertising technology that helps marketers reach targeted audiences across publishers and devices. While it has felt the effects of decisions by the likes of tech companies like Alphabet and Apple to prevent tracking people across their internet usage, the growth of connected TVs (CTV) seems to be outweighing those concerns.
CEO Jeff Green told analysts earlier this year, "the number of brands spending more than $1 million in CTV on our platform has already more than doubled year over year," and it is The Trade Desk's fastest-growing channel.
Its stock is also not cheap by traditional metrics, but the total addressable market for the advertising industry is moving rapidly toward that $1 trillion, giving the ad-buying platform plenty of opportunity to grow into its valuation.
