This year has been a constant reminder that no matter how long you have invested, you have not seen it all.
The Coronavirus Disease 2019 (COVID-19) pandemic has squeezed about 10 years of volatility over a four-month stretch and taken investors for a journey. We have witnessed the benchmark S&P 500 loses more than a third of its value in less than five weeks, as does the technical heavy Nasdaq Composite rattling off one record high after the other in recent weeks.
But periods of increased panic and volatility have historically proven to be good for long-term oriented investors. That’s because it allows people to buy big companies at a discount.
And if the stock market has taught us anything, it̵
Although in the near future increases in Okta (NASDAQ: OKTA) can be aptly described as meteoric, and some short-term visibility is always a possibility, a trend to absolutely hit the table in this decade is cyber security. Although it may seem expensive now, but you will probably kick yourself five or ten years from now because you don’t buy it at this “bargain price.”
One reason why cybersecurity is such a hot industry is that companies were already moving to remote work environments and sharing clouds long before COVID-19 struck. The pandemic has only accelerated the demand for cloud development and therefore cloud protection services. Don’t forget that cybersecurity is not an optional solution. No matter how good or bad the economy is, large and small businesses need solutions to protect their information against illegal activity. This gives cybersecurity companies a certain expectation of a consistent cash flow.
What makes Okta an exciting choice is the company’s identity verification solutions. Many of Okta’s platforms rely on machine learning to develop and identify situations where additional precautions, such as two-factor authentication, may be necessary before granting access to a shared cloud.
In addition, Okta does not offer a size in all sizes. Rather, its solutions are scalable for a company’s needs. This means that there is a high likelihood that Okta will generate better margins over time as long-term customers grow and add additional Okta security solutions.
In my opinion, Okta has the potential to average 30% annual sales growth during much of this decade.
Another smart store to buy that may look expensive now but has all the tools needed to support a high valuation is natural pet food and candy makers Freshpet (NASDAQ: FRPT).
Just as cyber security is an unstoppable trend, so is our nation’s love for companions. Since 1988, the number of American households that own a pet has increased from 56% to 67%, according to a survey conducted by the American Pet Products Association. It is also noteworthy that the turnover of pet expenses has at no point in the last century at least decreased. Pet owners will pay what it takes to ensure the health of their honorary family members – and that’s where Freshpet comes in.
Just as we have seen that organic and natural foods take up a healthy portion of total food expenditure, Freshpet should focus on natural and organic ingredients for pets to produce similar results. A higher quality product has a higher expected price point and usually juicier margins. When Freshpet increases its footprint beyond 22,000 stores, as of June 12, 2020, it is anything but a certainty that double-digit growth will continue for the foreseeable future.
Furthermore, you cannot ignore that Freshpet is still at the beginning of marketing its brand and reaching its core audience. As its market penetration is improving among premium producers of dog and cat food, margins should increase and big profits should follow soon.
Kirkland Lake Gold
Who says that precious metal mining stocks can’t produce fantastic growth? Certainly not the owners Kirkland Lake Gold (NYSE: KL), which has seen the management acquire top-level assets and deliver some of the most impressive results in the entire mining industry.
Part of the Kirkland Lake story is that its underlying nuclear metal, gold, is currently more than eight years high. Apart from the uncertainty associated with COVID-19, gold benefits from historically low lending rates around the world and central banks pumping money into their respective financial systems are handing over. Such a measure should weaken the US dollar – which is good considering gold and the dollar usually moves opposite to each other – and send people to gold as the preferred supply of safe seas.
In addition to just higher prices for precious metal, Kirkland Lake Gold has the best balance sheet among gold stocks. It ended the first quarter with $ 530.9 million in cash and cash, as well as no debt. It also recently doubled its quarterly payout to $ 0.125 and repurchased 9.7 million shares totaling $ 329.8 million. All this management team has done in recent years is to improve shareholder value.
Operationally, Kirkland’s three producing assets delivered an all-in maintenance cost (AISC) of $ 776 per gold equivalent ounce (GEO) during the first quarter – and this was at higher costs in connection with the acquisition of Detour Gold. Even with this perceived heightened AISC, Kirkland is currently following an operating cash margin of better than $ 1,000 per GEO. Translation: You can expect robust reinvestment, a healthy dividend and perhaps further acquisitions in the future.