I own dozens of stocks in my personal portfolio, and I cover even more on a monthly basis through my writing here at The Motley Fool. Therefore, picking only three companies that aren't just good ideas but rather my favorites right now is challenging.

It took a lot of thought. But eventually, cloud-computing company DigitalOcean (DOCN -3.49%), equipment rental business United Rentals (URI -2.14%), and cybersecurity specialist CrowdStrike Holdings (CRWD -3.20%) stood out as my three favorite stocks right now. Here's why.

A mature person smiles while holding a tablet device.

Image source: Getty Images.

1. DigitalOcean

DigitalOcean is a cloud infrastructure company targeting small and medium-sized businesses (SMBs). At the JMP Securities Technology Conference in March, CEO Yancey Spruill offered this insight about this target demographic: "The good news about SMBs: They spend a lot in aggregate. The bad news: They don't spend a lot individually, so you better be efficient at attracting them."

Unlike many other software companies that target smaller enterprise customers, DigitalOcean is surprisingly efficient. One way to measure this efficiency is to examine the company's sales and marketing expenses. In 2022, it spent just 14% of its revenue on sales and marketing. Compare that to enterprise software company Asana, which spent 79% of revenue on sales and marketing expenses in its fiscal 2023, and customer relationship management platform HubSpot, which spent 51% in 2022.

Being efficient enables DigitalOcean to generate impressive free cash flow (FCF) as it grows. The company's FCF margin jumped from 6% in 2021 to 13% in 2022. And for 2023, management expects the margin to surpass 20% as it marches toward its long-term goal of a greater-than-30% FCF margin.

DigitalOcean's management expects its revenue to grow from $576 million in 2022 to $1 billion in 2025 -- a 74% increase -- while expanding these FCF margins to impressive levels. Even still, many investors disregard DigitalOcean because its FCF margin is assisted by stock-based compensation. It had $106 million in stock-based compensation in 2022.

This concern needs to be balanced with an equally important point: DigitalOcean isn't diluting shareholders with stock-based compensation. By using $600 million to repurchase shares in 2022, management actually reduced the share count by 5% in the past year. And it's authorized to use $500 million more on share repurchases. Therefore, I wouldn't fret over stock-based compensation in this case.

DigitalOcean's impressive growth and incredible margin expansion are why it makes my list of favorite stocks right now.

2. United Rentals

As of this writing, United Rentals stock is down 25% from its recent all-time high and trades at just 12 times its trailing earnings. That's a strong pullback. And history suggests it's a good valuation to buy United Rentals stock for the long term.

Like DigitalOcean, United Rentals' FCF margin is strong at 15% in 2022. To be clear, it costs a lot of money to build a cash-generative operation of this size -- the company claims a 17% market share in North America as the industry's largest player. And this requires an equipment fleet valued at $19.6 billion. In short, it's hard for another player to build what United Rentals has. Scale like this takes time.

United Rentals' management is opportunistic with its fleet management. When rental demand is high, it tends to keep equipment in use, servicing as needed. This core rental business is great, with a 42% gross margin in 2022. However, when demand is lower or equipment reaches the end of its usefulness as a rental, management also sells these items for a handsome profit. Used equipment sales had a 59% gross margin in 2022. It's a win either way.

In 2023, United Rentals is paying a dividend for the first time. However, the company is also authorized to repurchase $1.25 billion in stock. And share repurchases are a big reason it's been a long-term winner. As the chart below shows, its share count is down 17% over the past five years, causing FCF per share to nearly triple over this time span.

URI Average Diluted Shares Outstanding (Quarterly) Chart

URI Average Diluted Shares Outstanding (Quarterly) data by YCharts.

United Rentals isn't a complicated story. Its services are important for infrastructure and are routinely in demand. These services generate substantial profits, and management returns profits to shareholders. I don't see any reason that won't continue in 2023 and beyond. And those who invest today are getting a good price.

3. CrowdStrike

It's been over a year since the S&P 500 hit its all-time high, and it's pulled back substantially since then. Pullbacks like this can be a good time to go bargain shopping. But whereas I noted United Rentals' valuation on an earnings basis, here I'll note CrowdStrike's valuation on a sales basis.

CrowdStrike trades at 13 times sales, insanely expensive compared to United Rentals, which trades at a paltry 2 times sales. But here's why I believe CrowdStrike stock is a good value right now, nonetheless.

In the last 12 months, CrowdStrike has generated $2.2 billion in revenue. For comparison, the endpoint cybersecurity market size is expected to reach about $25 billion in five years, according to third-party research from Fortune Business Insights. If CrowdStrike is the top dog in endpoint security by 2028, it has enough upside to justify its lofty valuation.

There's reason to believe CrowdStrike has what it takes to be that top dog. Consider that International Data Corporation said that CrowdStrike's market share in the endpoint cybersecurity market jumped from 13.8% in July 2021 to 17.7% in June 2022. It was CrowdStrike's third consecutive year of outpacing all competitors with market-share gains.

From here, CrowdStrike hopes to gain market share by targeting SMBs, which could be a bigger endpoint cybersecurity opportunity. But as noted with DigitalOcean, this demographic requires an efficient customer-acquisition strategy. And that's what management believes it has in its partnership with Dell Technologies.

Dell has one of the world's largest enterprise customer bases. And through this partnership, Dell's sales representatives will now be offering CrowdStrike's services, which should keep marketing expenses in check for CrowdStrike.

During bull markets, growth companies of CrowdStrike's quality rarely go on sale. But CrowdStrike stock is now down more than 50% from its all-time high. And given how much the company is executing and how much opportunity lies ahead, this is currently another of my favorite stocks.

In conclusion, DigitalOcean, United Rentals, and CrowdStrike are my three favorite stocks right now and where I'd put new money to work in the stock market today.