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3 investors share their shopping lists

3 investors share their shopping lists

The start of 2022 has been tumultuous. Between the threat of higher interest rates, slowing economic growth and an invasion of Eastern Europe, many growth stocks have been absolutely hammered in recent months.

Deals can be made after the sale, so it’s time for those with a long-term mindset to start putting some money to work. With that in mind, three contributors have made (or plan to make) a few purchases. It’s awful to buy when the news is terrible, but it’s still a good exercise to do it, document the reasons, and then backtrack after the crises have subsided a bit. Here are the shopping lists.

Image source: Getty Images.

I bought two stocks that crashed and a stable Eddie

Nicholas Rossolillo (Shopify, Doximity and Applied Materials): In any given year, I almost always have money in reserve in my investment accounts. The amount of cash varies (usually no more than 10% of my account value), but it’s always there, ready to be deployed when the time is right. With growth stocks falling sharply as companies themselves continue to expand at a healthy pace, March seemed like a good time to splash all that cash on a spending spree.

I have allocated existing positions in my portfolio, but Shopify ( STORE -3.61% ) and Applied materials (AMAT -1.10% ) were two of the best buys. Shopify in particular has been a great investment over the years, and I still see a very long lead as it helps small businesses reclaim some power in the retail world through its extensive e-commerce offerings . Stocks aren’t cheap, given that Shopify will start spending a little more aggressively in the coming years to grow its distribution network, but I think Shopify merchants will appreciate the flexibility of inventory management and the ability to offer fast delivery times to the customers of this project. So I added more to my existing post.

Applied Materials, on the other hand, is a more mature company. Of course, it also expects to grow at a double-digit pace this year – a momentum it also plans to continue in 2023, as a global chip shortage forces chipmakers to scramble to increase production capacity. But Applied Materials and a small handful of peers dominate the development and sale of the machinery needed to make chips. As a result, they tend to be a slower but more stable way to play in the semiconductor industry and generate plenty of idle cash which is returned to shareholders via dividend and share buybacks. Trading at less than 15 times one-year forward earnings, Applied Materials was too cheap to ignore, so I bought more.

For my third stock, I had been eyeing a new telehealth play: Doximity (DOCS -3.50% ). I already own other telehealth and health tech stocks, and they were hammered as their first pandemic boom went bankrupt.

But I’m still optimistic that companies trying to make the delivery of patient care more efficient have a bright future. Doximity operates a sort of social network for healthcare professionals (sometimes compared to LinkedIn), from which healthcare providers can call or video message patients, send and sign documents, and manage their schedules. it grows fast, and generating an incredible amount of free cash flow. It’s a powerful combo, so I started a position and will buy more over time if Doximity’s impressive history continues.

Speak soft and carry a big check

Anders Bylund (Netflix, Autodesk and Polkadot): I don’t trade often. My last stock trade was in December and I haven’t bought any cryptocurrency in the past two months. I’m a patient guy with a really long time horizon for my investments, so I don’t worry too much about day-to-day price moves, timing the market to perfection, or jumping on the hottest tips. My natural tendency for stoic calm is also amplified by the Fool’s uncompromising rules of disclosure, which often prevent me from making the transactions I have in mind.

Well, it’s time to act in this inviting market. All major stock indices have fallen more than 5% in 2022, and many of my favorite stocks and cryptocurrencies are on sale right now.

These disclosure rules won’t allow me to take immediate action on the tickers I’m about to mention, just to make sure my humble words don’t make a lucrative difference to their market prices. That being said, I intend to invest in these three names next week when today’s trading limits expire:

  • netflix ( NFLX -0.49% ) is already my biggest holding, but it’s also my best investment idea for fresh cash at these ridiculously low prices. Market makers overreacted to a short-lived slowdown in subscriber additions, and Netflix hasn’t been this affordable in years. I have to add to my position for the duration of the reduction.
  • Design software specialist Autodesk ( ADSK -0.43% ) suffered a 26% price decline in 2022 and a 40% drop from all-time highs in November. The stock doesn’t look cheap by traditional valuation metrics, as it trades at 10 times trailing sales and 30 times free cash flow. However, it’s a boon considering the company’s unique position in the market at the crossroads of several long-term megatrends. I can’t keep my hands off this growth stock with a 40 year operating history.
  • Finally I keep calling Peas ( DOT 1.31% ) the best long-term crypto investment, but my own stance is puny. It’s time to take this unique blockchain platform seriously, expanding my Polkadot exposure from a speculative bet to a meaningful investment. The DOT coin has fallen 29% this year and 60% from November’s 52-week highs, and I expect long-term multibagger returns.

A leading fintech platform was unfairly punished

Billy Duberstein (LendingClub): The market seems to have priced in some kind of recession very quickly due to Federal Reserve rate hikes, which punished some lenders and fintech stocks like loan club ( CL -2.35% ). Remarkably, LendingClub is down around 67% from its 52-week highs set in November – and that’s despite earnings results that have been quite strong over the past two quarters.

Hatred seems to have gone a bit too far and doesn’t incorporate the new facets of LendingClub’s business model. The market has always viewed LendingClub as a risky and unproven fintech platform that provides unsecured personal loans to US consumers for group purchases or to refinance credit card balances. LendingClub had traditionally sold all loans to third-party investors, such as banking partners, fund managers, or individual investors; one concern is that these investors could flee in a recession, in addition to underwriting issues.

There are two big reasons why these issues are overstated in 2022. Firstly, LendingClub has been at this game since 2006, before the Great Recession, and it’s a leading user of data analytics and technology, including including non-traditional metrics to supplement traditional credit scores. . At the end of last year, its pre-pandemic loans had delinquency rates 50% lower than other fintechs, and its delinquency rates were also lower than the industry as a whole. Additionally, LendingClub has moved away from its roots as a high yield lender and has really focused on core customers in recent years with more conservative underwriting.

Second, LendingClub is really a new company since it acquired Radius Bank in early 2021 and is now armed with a banking license. LendingClub’s cost structure is down and it holds more of its loans on its own balance sheet – between 15% and 25%, according to its new model. On-balance sheet loans are more profitable for LendingClub, and the “eat your own kitchen” stance has also spurred strong demand from third parties. Being less dependent on third party funding is a huge advantage and removes a big risk in the previous business model.

After this year’s liquidation, LendingClub is trading at just 12 times this year’s earnings estimates. It’s the kind of valuation normally reserved for much larger, mature banks without much growth. But LendingClub forecasts revenue growth of 34% to 47% and profit growth of 600% to 700% this year; while part of this is a throwback to the pandemic, LendingClub appears to have a lot more growth ahead as it accelerates new customer acquisition for its bank and expands into new products, such as refinancing of car loans.

In fact, analysts expect LendingClub to grow earnings another 73% in 2023, and the stock only trades less than 7x those forward estimates.

Yes, inflation is hurting consumers today, but the job market is strong and household balance sheets are still healthy. I don’t think a bad recession, in which charges soar, is likely. Recession fears and a flattening yield curve caused LendingClub to sell way too far, which is why I’ve been buying more stocks recently.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.