It's hard to pick a favorite stock. But if you put a gun to my head, I think I would name Shopify (SHOP -1.81%), Silvergate Capital (SI -20.00%), and Doximity (DOCS -1.78%).
All three companies are using the internet to disrupt trillion-dollar markets in retailing, finance, and healthcare. So I think these stocks are going to be huge winners over the next decade.
Here's why you might want to buy shares now -- while the stocks are a lot cheaper than they used to be.
1. Shopify: Down 65% in 2022
Shopify's market cap is down to about $40 billion. It's a highly volatile stock, and it's always been expensive. The stock crashed hard back in 2020, when the world was shutting down thanks to COVID-19.
In fact, I think it was Shopify's announcement that business was outstanding that caused the stock market to bounce back as quickly as it did. Because of the pandemic-related quarantine, many retailers shifted to the internet. That's why Shopify and other online companies had amazing growth in the pandemic, as seen in this two-year chart of Shopify during the worst of the COVID shutdown.
What's remarkable is that Shopify's stock price -- around $33 as of this writing -- is now below where it was before COVID-19 struck. Obviously, if COVID-19 mutates and hits us again, this stock will skyrocket as it did before.
But it's downright irrational to think that Shopify is less valuable now than it was before the pandemic. The internet transformation of our economy is the most profound (and ongoing) trend in my investing lifetime. Retail has been shifting online for almost three decades now. The pandemic quarantine simply caused this trend to accelerate. And we're not going back -- the internet is faster, cheaper, and more efficient.
Shopify's stock has been hit because its comps are hard to beat from a year ago. And the company is building out its fulfillment capabilities for its retail clients. Constructing high-tech warehouses is expensive and will damp profit margins for a year or two. But this is an incredible business, and long-term investors will see huge rewards over the next 10 to 20 years.
2. Silvergate Capital: Down 64% in 2022
While other crypto stocks like Coinbase and Robinhood are consumer-facing brokerages, Silvergate Capital is a different animal. First off, it's a bank, not a crypto dealer. The crypto exchanges aren't competitors -- they are actually clients.
Many years ago, Silvergate wanted to solve a major problem facing the crypto industry. Crypto trades 24/7, but the banking industry does not operate 24 hours a day, so that inability to move dollars around quickly was hampering the industry's growth. Silvergate solved that problem by creating the Silvergate Exchange Network, or SEN. This allowed Coinbase and other dealers to quickly move funds around the clock. Growth exploded for this little bank, as major crypto exchanges -- and their institutional clients -- started depositing money there.
Today, Silvergate enjoys 45% profit margins and 93% revenue growth rates. The rise in interest rates is actually bullish for Silvergate, which had $14.9 billion in deposits in Q1. And for 99% of its deposits, Silvergate pays no interest. So any increase in federal rates is pure profit for this bank.
Silvergate has a huge amount of optionality in the crypto universe. The bank is rolling out SEN leverage and is now making loans for customers who want to use crypto as collateral. And it's going forward with its stablecoin plans, after partner Meta Platforms bailed in the face of federal regulations.
The banking industry is inherently conservative, so it was very late to the crypto party. Silvergate management had incredible foresight, and now it has both a tech advantage and the benefits of the network effect. I don't think larger banks will be able to poach its client base -- which makes Silvergate a heck of an acquisition candidate. Its market cap is less than $2 billion.
3. Doximity: Down 26% in 2022
While Teladoc Health (TDOC -2.04%)is the most famous name in telehealth, my money is actually on Doximity. I think this stock is the most valuable internet company in healthcare. Why?
Teladoc is, in essence, a virtual hospital. On Teladoc you can see a doctor within minutes. That's an attractive innovation, and I think Teladoc investors will do quite well. But there's a flaw in this business, too. When I pitched that stock to my father, he asked a simple question: "Can I talk to my doctor on Teladoc?"
The answer is no, and that's definitely a drawback. Healthcare is based on trust. Many people like to have a relationship with their doctor. You can't do that on Teladoc. On Teladoc, you get the doctor you get. On Doximity, you can have a virtual chat with your own doctor.
So that's an important distinction in business models. Teladoc is, in essence, competing with hospitals (and doctors) for patients. Doximity is not in competition. Instead, this company is an internet portal for doctors.
Doximity is where doctors go to find jobs and where hospitals go to find physicians. Indeed, 80% of American physicians are on Doximity's platform (and 90% of med students). And because of this attractive audience, pharmaceutical companies pay Doximity a lot of money to target messages to its doctors.
But perhaps the most important part of Doximity's business is its Dialer segment. Using Dialer, physicians can do internet house calls with their patients.
So while I think virtual healthcare will be a huge market opportunity, in my opinion Doximity has a stronger business model to capitalize on this potential. And its sizable profit margin -- 44% on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis -- shows just how wonderful this model is. Doximity reported 157% net revenue retention from its existing customers in Q1. It's a $7 billion company, and the upside is substantial.
