I don't mind going out in the rain, and that's probably why I didn't have a problem buying stocks last week. I bought a new stock and added to two existing positions last Wednesday. What was in my shopping bag?
I was a buyer of Roku (ROKU 1.58%), UiPath (PATH -1.47%), and Brookfield Renewable (BEPC -0.89%) last week. It will naturally take a fair amount of time before I know if I was early or late -- if I was right or wrong -- but I'm patient. Let's see why I put some money to work on these three very different investments.
Image source: Getty Images.
Roku
I've been a Roku investor since shortly after its IPO five years ago. It was a feast through the first few years. It's been a famine lately. The stock is down nearly 90% -- yes, 90% -- from the all-time high it hit last summer. The stock would need to be a 10-bagger from here to get back to where it was at its peak.
A reality check here is that Roku was one of many growth stocks that were overvalued during last year's buying frenzy. It's easy to dissect things in retrospect. However, it's not as if the company's fundamentals have fallen apart over the past year to merit Roku stock trading at a three-year low this month.
Roku is still growing, as the record 63.1 million is 14% higher than a year ago. We're not streaming less, as the 20.7 billion hours folks spent on the platform in the second quarter is 19% ahead of the same three months last year. Ad revenue has also outpaced user growth, so usage and monetization per active account are on the rise.
Things aren't rosy once we dig a little deeper. Guidance for the third quarter, which it will announce in a couple of weeks, is rough. It sees revenue rising just 3% year over year for the quarter, so we're going to see sequential dips in either active users or average revenue per user. The bottom line has been a mess this year, and a return to profitability isn't happening anytime soon. Naturally I think that the malaise is more than priced into the shares at current prices. I continue to see Roku as a leader of the still-growing streaming video stocks universe.
UiPath
With labor costs rising, it's not a surprise to see companies trying to streamline payrolls. UiPath could be a beneficiary of the trend. It's an enterprise software specialist in robotics and automation.
Business is slowing at UiPath. It sees revenue climbing 12% to 13% in fiscal 2023, or 22% on a constant currency basis. It's a step down from the 24% increase -- or 35% before foreign exchange currency translations -- in its latest quarter. Companies are cutting back on their spending right now, but you have to think that investments in robotics and automation will be a big part of the future once the global economy starts to recover.
UiPath is in good shape with its cash-rich and debt-free balance sheet. A climate of rising rates will only help UiPath and weaken leveraged players. Existing customers are happy, as the dollar-based net retention rate is a hearty 132%. With more than $1 billion in annualized recurring revenue, it's surprising to be able to get the stock for a fifth -- yes, a fifth -- of its IPO price from last year. I initiated a position in UiPath last week.
Brookfield Renewable
I have been raising cash in recent months by lightening some positions in REITs that served me well in 2021, especially with the surge in money market rates as an even safer way to generate income. There needs to be a strong thesis behind the payouts, and that led to me adding to my position in Brookfield Renewable last week.
Renewable energy was heating up even before gas and oil prices started surging, and we're seeing more countries and companies embrace greener forms of energy. Brookfield Renewable's portfolio includes solar, wind, and hydroelectric assets. It's been taking a hit this month given the bearish thesis that countries won't invest in clean energy, but I see that as just short-term noise. The stock's surrendering more than a quarter of its value over the past four weeks has propped up the current yield to a respectable 4.4%. My idea of renewing energy is adding to this renewable energy leader.
