1 High-Growth Stock for Investors to Consider Buying on the Dip

Tired of stock market volatility? You're not alone, but investors also have a prime opportunity to invest in some high-quality businesses at a serious discount right now. In this segment of Backstage Pass, recorded on Dec. 15, Fool contributors Rachel Warren and Connor Allen discuss one such stock. 

Rachel Warren:Following on the uncertainty in the job market, that's one of the reasons stocks have been all over the place lately. But according to Jim Cramer of CNBC, he recently said that investors should get used to shrinking valuations for once high-flying stocks.

His view is that this is something that's here to stay. Now we know that many stock valuations are still high, but there is still this broader trend we've been seeing over the last few months of high growth companies plummeting from where they were even a few months before.

On that note, what's the stock or stocks that you've held off on buying because of their valuation and now you're maybe considering taking a position in that it's trading down? Connor, why don't you take this one first?

Connor Allen: Yeah. I have to say, I disagree with Jim on that. I think a lot of stocks trade at high multiples because of potential future growth. Sometimes that demand is brought forward into the stock price. I don't see this being something that lasts a long time. I see these valuations going up with sales and with the growth these companies will see.

But one specific company that I actually recently added to my portfolio was Latch (LTCH -1.85%). Latch is a company that is revolutionizing the way that doorknobs are made.

Everyone talks about SaaS companies because they are able to increase revenues at growth rates that previously were unheard of. Latch is bringing a SaaS model to the most basic thing in the world and that's a doorknob. You can see right here this is a picture of it. They connect with your phones. They're mainly in apartment complexes. I think 30-40% of new apartment complexes are actually built with Latch already installed.

That's a positive note for the company right there. But they're 45% off their highs from this year. They're now looking at about a $1.1 billion market cap, which was an attractive price for me so I went ahead and bought some few weeks ago. Just a little bit more about them. The growth opportunity or I guess why they will succeed it's due to safety. Your door is never left unlocked because it connects to your phone, your door it can sense when your phone is in the vicinity, and it will unlock and  can sense when your phone gets out of vicinity and it will lock.

Something that's really interesting, nobody forgets their phones anywhere. They do have a backup in case your phone dies, so that would just go on your key chain. Also for the ease-of-use, especially for landlord. If you have landlords giving out key used to all of their tenants, you're looking at 100 tenants.

If one of them loses their key, or they leave the apartment and they don't bring the key back. Instead of having to go change the lock, the landlord just reprograms it, and it's just super simple, really easy for the landlord to do and then he can just rent out that apartment to somebody else and program their phone with the door.

Also another growth opportunity for them or why they will succeed is because of their SPAC partner, Tishman Speyer. Tishman Speyer is a real estate developing company and they built a lot of apartments and Latch is strategically partnering with them so that as Tishman Speyer is developing they're including Latch in all of the different developments that they're doing.

Right now, they're just doing apartments but in the future we can see potential in the single-family home arena. That's yet to be seen if that's going to be opportunity for them in the near future or long-term future. They haven't talked much about that. Their stock price is down 45% off their high this year, but the revenue is up 120%. Their total bookings year-over-year is up 181%.

Sorry, this is covering my camera. My total book ARR year-over-year, is up 126%. Overall, it's been a really good year for them. Obviously, they're just getting off the ground, so these numbers are really high. But I think that there's definitely a few years ahead of pretty high growth for this company. A little bit about the management CEO, Luke Schoenfelder.

He is a former employee at Apple. He did some developing there, I believe. You can tell when you go to Latch's website it has all has that Apple aesthetic look to it, which I like. But it's a company that fell a lot. I like everything about the company. I think it has some really great potential in the future. That's why I went ahead and purchased a small position, by the way, not a large position.

Rachel Warren: I really am fascinated by that business model. I think for people like me, I lose my key all the time. [laughs] This could be a really helpful service, I'm not sure that it's going to be implemented in any Rome apartments anytime soon. But this is very cool.

Connor Allen: Is that is where you at, you're in Rome?

Rachel Warren: Right now I'm not but a good part of the year I am.

Connor Allen: Okay.

Rachel Warren: We still use like the skeleton keys a lot of times. [laughs] But I'm always panicking, checking my bag, do I have my key? I think this would be a really great thing to have on those days and also just really impressive growth, definitely one to watch.

It's a great reminder of something we've been seeing a lot with stocks lately is maybe share prices are trending down, but how is the business doing? If the business is still doing great, that share price should be perhaps an incentive to dig a little deeper and not necessarily to shy away from that company.