Unless you're a short-seller, this has probably been a difficult year. The major U.S. stock indexes all plummeted at least 20% from their respective highs, which is the requirement to be labeled a "bear market." Were the year to end right now, I'd be looking at my worst performance, on an unrealized basis, in about a decade.
But the thing about bear market declines is that they've always represented once-in-a-decade, if not once-in-a-generation, buying opportunities for patient investors. Those who have cash at the ready, which won't be needed for emergencies or to cover bills, have the potential to buy into game-changing businesses at prices that may not be seen again.
Image source: Getty Images.
For the majority of my 24 years as an investor, my available cash has represented somewhere between 0% and 10% of my investment portfolio. At the moment, nearly 30% of the value of my portfolio is cash waiting to be put to work.
Some of this cash is being invested into the 46 stocks I already have positions in. But with a mountain of cash at my disposal, there are four brand-new stocks quickly rising up my watchlist that I'm looking to buy next.
Fiverr International
The first brand-new stock I'm considering buying is online-services marketplace Fiverr International (FVRR +2.44%). Though some employees have returned to the office in the wake of the COVID-19 pandemic, more people than ever are working remotely on a part-time or full-time basis. That bodes well for a gig-economy company giving freelancers a marketplace to offer their services.
One of the things that really helps Fiverr stand out from its competition is its marketplace. Most freelancer marketplaces present tasks/jobs on an hourly basis. On Fiverr's platform, freelancers present their jobs as a package price. Being able to provide this price transparency has really resonated with buyers on the platform. This is a key reason why both the aggregate number of buyers and average spend per buyer have climbed steadily, even amid a challenging economic environment.
But there's no question that, from an investing standpoint, Fiverr's take-rate is the real superstar. The company's take-rate describes how much of each deal negotiated on its platform the company gets to keep. Ideally, Fiverr wants its take-rate to be as high as possible without scaring away freelancers or buyers.
During the September-ended quarter, Fiverr reported a take-rate of 30%, which is almost double that of its top competitors. If Fiverr can sustain a 30% take-rate while having average spend per buyer increase, it'll be in phenomenal financial shape and represent an amazing value at its current share price.
NASDAQ: CRWD
Key Data Points
CrowdStrike Holdings
The second stock that's very much piqued my interest after an abysmal 2022 is cybersecurity company CrowdStrike Holdings (CRWD +1.80%). Although growth stocks with premium valuations have been pummeled this year, CrowdStrike continues to show that it's worth every penny of its premium.
There isn't a key performance indicator for CrowdStrike that hasn't improved steadily and/or outpaced its competition. Since the end of fiscal 2017, CrowdStrike's subscriber count has grown from 450 to more than 21,100, while its gross retention rate has increased from around 94% to slightly over 98%.
What's even more impressive is CrowdStrike's ability to get its existing subscribers to spend more. When fiscal 2017 came to a close, only a high-single-digit percentage of its clients had purchased four or more cloud module subscriptions. Today, 60% of its subscribers have bought five or more cloud module subscriptions.
Not only does this demonstrate the trust businesses are placing in CrowdStrike's end-user protection, but it perfectly explains why the company's adjusted subscription gross margin has been hovering just shy of 80% for more than two years.
I'd be remiss if I didn't also point out that CrowdStrike's security platform, Falcon, was built in the cloud and relies on artificial intelligence (AI) to grow smarter over time. This isn't the cheapest cybersecurity solution available, but it's one businesses have shown they're willing to pay a premium to use.
Image source: Getty Images.
Salesforce
A third brand-new stock I'm looking to buy with my mountain of available cash is cloud-based customer relationship management (CRM) software provider Salesforce (CRM +2.12%). CRM software is what consumer-facing businesses use to enhance their relationships with existing clients and boost their sales.
I'm a big fan of industry leaders, and Salesforce is the clear kingpin within the CRM space. According to data compiled by IDC, Salesforce has held the No. 1 share of global CRM spend for nine consecutive years. More importantly, it's grown its share in virtually all of those years. In 2021, it accounted for close to 24% of all CRM spending, which is more than its four closest competitors on a combined basis. Salesforce is the go-to CRM software provider, and none of its competitors are a threat to dethrone it anytime soon.
In addition to a healthy organic growth rate, Salesforce CEO and co-founder Marc Benioff has overseen a number of acquisitions designed to expand the company's revenue stream, expose new businesses to its ecosystem, and offer new channels for cross-selling opportunities. Some of the more notable deals Benioff has made include buying Tableau Software and Slack Technologies.
According to Benioff, Salesforce is on pace to achieve $50 billion in full-year sales by fiscal 2026 (the 2025 calendar year). This would represent a near-doubling in sales in a four-year stretch, which is phenomenal, even taking into account that acquisitions will have somewhat aided this sales growth. While I'm not thrilled with the company's relatively high stock-based compensation (10.6% of full-year sales in fiscal 2023), it's a negative I'm willing to put up with if Salesforce can maintain its market share dominance and an annual growth rate of 15% to 20%.
NASDAQ: UPST
Key Data Points
Upstart Holdings
The fourth brand-new stock I'm looking to buy next -- and arguably one of the most hated stocks on Wall Street at the moment -- is cloud-based lending service Upstart Holdings (UPST 0.81%). Even though aggressive rate hikes from the Federal Reserve will limit near-term loan demand and increase loan delinquencies, it's Upstart's technology and expansion opportunity that are most intriguing.
Instead of using stodgy financial data like credit scores, Upstart's lending platform relies on AI and machine learning software to determine the creditworthiness of applicants. During the highly challenging third quarter, 75% of the loans the company processed were approved and fully automated. This automation helps save the company's 83 bank and credit union partners time and money.
But even more importantly, Upstart's cloud-based lending platform is opening doors for those who had no chance to be approved using the traditional loan-vetting process. Even though Upstart approvals have lower average credit scores than the traditional loan approval process, the delinquency rates for Upstart and the traditional process have been similar. Upstart is providing a pathway to financial tools some people haven't had access to before, and it's increasing the potential pool of customers for lending institutions without adversely affecting their credit-risk profiles.
The other big reason to like Upstart is that the company is just getting started. For years, it's primarily been focused on personal loans. But in 2022, it began vetting auto loans and small business loans. The loan origination market for auto loans and small business loans is a combined $1.43 trillion, which is about 10 times larger than the $146 billion addressable market for personal loans.
