The stock market is nothing but volatile, and the market has made itself clear with that at the start of 2021. The SPDR S&P 500 ETF (SPY -0.71%) is down over 7% year to date, with 2022 lows being 9% down and highs being in the positive territory for the year.
For long-term investors, however, drawdowns and volatility can be the opportunity to buy high-quality companies at major discounts. If an investor's time horizon is the next decade or two, these discounted prices might be a great time to add shares of some of your favorite stocks. If you want to make the most of this downturn, you might want to consider adding Coupang (CPNG -0.59%) and Doximity (DOCS -1.88%) to your portfolio.
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1. Coupang
South Korea is known for the compactness and the density of its population. On average, there are 1,336 people per square mile, compared to the U.S., which has just 94 people per square mile. This density of consumers has allowed Coupang to thrive and become one of the best companies for customer service. Coupang offers e-commerce delivery services that put Amazon's (AMZN -2.30%) two-day delivery to shame: It offers same-day, next-day, or dawn delivery for all of its orders -- for free.
Coupang can do this because of South Korea's compact population, combined with the fact that 70% of the South Korean population lives within seven miles of a Coupang logistics center. Coupang thrives as the market leader, and with this title, it has gained the mindshare of consumers in South Korea. Groceries and other highly recurring delivery orders are commonplace in Korea, which has helped Coupang gain over $4.6 billion in third-quarter revenue – which grew 46% year over year.
Coupang has major penetration in Korea, but it does not plan on stopping there. The company has expanded its service into Japan and Taiwan, both of which are densely populated countries at 899 and 1,742 people per square mile, respectively. With nearly $4 billion in cash on the balance sheet, the company can subsidize its cash from operating activities loss -- which was $208 million in the first nine months of 2021 -- while still investing heavily in logistics centers and expanding its footprint in these new countries.
The company already invested over $500 million in property and equipment in the first nine months of 2021, so Coupang sees Japan as a critical growth opportunity. At just 1.8 times sales, Coupang is not valued for much success going forward, which leaves very lucrative potential returns for investors.
2. Doximity
Medical professionals use Doximity to collaborate with patients and other doctors to bring better care to the U.S. The app acts as an all-in-one platform for everything doctors, physicians, and medical students need. It has messaging services to communicate with other doctors and patients, along with a telehealth offering that has been used by over 350,000 users. For medical students, Doximity's app has a career growth page, which can help students and doctors find job openings and expand their professional networks. Another highlight is the company's research page, which gives personalized news and medical information about the newest drugs and practices.
The last part is where Doximity makes its revenue. Drugmakers looking to advertise their products can put research and advertisements onto that page, which can be one of the most valuable prospects for drugmakers. Doctors are among the most influential people when it comes to what drugs consumers take, so if the pharmaceutical companies can gain mindshare in a doctor's head, it can be a very profitable endeavor.
Doximity has become a place where advertisers can reach these doctors, considering that 80% of the U.S. doctors are on its platform, and drugmakers have been willing to pay any price to do this. Doximity has 258 customers who spend over $100,000 on the platform, representing almost 90% of total revenue, and existing customers continue expanding their ad budget with Doximity. The company's net retention rate in Q3 2022 was 171%, meaning that existing customers are spending 71% more today than they did in the year-ago period.
With such a large customer base and their additional spending being almost purely profit, the company's net income and free cash flow margins are some of the most impressive margins in the market. The company reported 57% net profit margins in Q3 and free cash flow margins of 26%. On top of this incredible profitability is top-line growth of 67% year over year in Q3, giving investors the best of both worlds.
At 32 times sales, this company is not cheap. However, its growth looks promising. Doximity has 90% of all U.S. medical students on the platform, so the next generation of healthcare professionals are already using Doximity. This could give it incredible staying power for the next 20 years, which is why Doximity looks appealing, despite its high valuation.
