2022 has been a roller-coaster ride for investors so far. The S&P 500 hit an all-time intraday high in early January, but closed the first quarter of the year with its biggest quarterly decline in nearly two years. Individual stocks, of course, plunged too. While that's scary, you could build a lot of wealth in the long term if you buy the dip, provided you know where to look. Here are three no-brainer stocks that have tanked in recent months you'd want to buy now and hold.
The growth potential here is unmistakable
Caught in the sell-off of growth stocks, Upstart Holdings (UPST -3.65%) stock has lost more than one-third its value this year, and a staggering 66% of its value in the past six months, as of this writing. It's true that Upstart stock ran up too high too fast, but it's also true that the company is growing rapidly and sitting on trillion-dollar opportunities. If you believe in Upstart's growth story, now's the time to buy.
Upstart uses artificial intelligence to analyze more than 1,000 data points per borrower to screen them and assess the risks of lending. So while lenders like banks can use Upstart's services to originate low-risk loans, potential borrowers can get quick loans at low rates. It's a win-win for both sides. Much of the process is automated, and Upstart also doesn't have to bear credit risks as it doesn't lend money but only helps originate loans in return for a fee.
Upstart's numbers for 2021 reveal stunning growth:
- Revenue up 264% to $849 million.
- Income from operations up 1,097% to $141 million.
- Net income up 2,164% to $135 million.
Such high growth rates may not be sustainable, but Upstart won't stop growing given the markets it is targeting. After unsecured personal loans, Upstart has already entered auto loans and tapped top automakers like Volkswagen as initial clients. Upstart is aiming for small-dollar and small-business loans next, and expects to enter mortgage lending in 2023.
The mortgage market alone is worth at least $4 trillion based on originations, while the auto loan market is worth more than $700 billion. That's massive, and one of the biggest reasons why Upstart stock looks so appealing right now.
This megatrend could make early investors a fortune
If you're ever stuck about where to start when it comes to investing, look out for megatrends, or structural shifts that could change the dynamics of an industry. Even better if the industry is critical to the economy. And then, find top players poised to ride the megatrend. Case in point: renewable energy and Brookfield Renewable Partners (BEP -2.55%).
In the U.S. alone, solar and wind accounted for 80% of all electricity capacity addition in 2020, up from under 30% in 2010, according to Statista. Brookfield Renewable is one of the world's largest pure-play renewable energy companies with a portfolio spanning hydropower, solar, wind, and battery storage operations across North America, South America, Europe, and Asia.
Brookfield Renewable earned record funds from operations (FFO) per unit in 2021 and ended the year with a whopping global development pipeline of 62 gigawatts (GW), including 15 GW in late-stage development. It also had $4.1 billion in liquidity at the end of 2021 to invest in growth. What I really like about the company, though, is its strategy to recycle capital, or simply sell assets as they mature and reinvest the proceeds opportunistically in assets with higher returns potential. Brookfield Renewable has executed well so far going by its FFO growth.
With FFO, shareholder returns have risen too -- between 2013 and 2022, Brookfield Renewable's dividend grew at a compound annual growth rate (CAGR) of 6%.
The company is targeting 5%-9% annual dividend growth in the long term, which when combined with Brookfield Renewable's 3% dividend yield almost assures you 8% returns right away if you own the stock. With the Russia-Ukraine conflict sending prices of oil and gas soaring and compelling more nations to shift from fossil fuels to renewable energy to secure future energy needs, the upside for Brookfield Renewable shares looks stronger than ever now.
First mover in an industry with exponential growth potential
Teladoc Health (TDOC -2.73%) is another stock that's been hammered but has solid growth potential. Teladoc is the world's largest telehealth company and offers virtual primary care as well as chronic disease management services.
It's true that the COVID-19 pandemic has been one of the biggest drivers of the telehealth market, and that Teladoc's pace of growth will likely decelerate as economies open up. Yet, the global telehealth market was worth around $144.4 billion in 2020 according to Fortune Business Insights, and most research firms project it to grow by at least a 30% CAGR in the coming few years.
Teladoc, on its part, expects revenue to grow at a CAGR of 25%-30% between 2021 and 2024. The company generated $2 billion in revenue in 2021, up 86% from 2020. Visits on its platform rose 38% to 15.4 million last year.
After its bumper acquisition of chronic disease management company Livongo in 2020, Teladoc is now focused on other high-potential areas like mental healthcare and is targeting higher revenue per member through multiple product offers. In fact, more than 40% of Teladoc's members had access to multiple products in 2021 versus fewer than 10% in 2017, including primary care, general medicine, mental healthcare, expert medical, nutrition, and dermatology.
There's ample room and multiple levers of growth for Teladoc, and the stock has fallen so hard so fast that it's hard to argue with the current price.