Tech is becoming cleaner, greener, and meaner. So if you aren’t already investing in this sector, now is the time to start. Away from the FAANG dynasty (Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), and Google (NASDAQ: GOOG), a number of companies are thriving in this COVID-19 world.
Each stock has shown strong fundamentals and good technicals in recent years with strong market recovery in the last two months. But what makes them so special? Here is Adobe (NASDAQ: ADBE), PayPal (NASDAQ: PYPL) and SolarEdge (NASDAQ: SEDG) as my 3 top picks this month.
Adobe has been around for years, a household name and almost as necessary as Microsoft’s (NASDAQ: MSFT) Office for today’s computers. Being a long term, large-cap, growth stock with no dividend offered, many investors tend to give this one a pass. Yet, several ETFs including the First Trust Cloud Computing ETF (NASDAQ: SKYY) and the IGV ETF (BATS: IGV) hold Adobe as one of their top stocks.
Adobe has several competitors in the cloud software arena, namely Salesforce (NYSE: CRM) and Autodesk (NASDAQ: ADSK), but this does not seem to pose a problem for Adobe as it achieved a record $3 billion in revenue for the first quarter of this year. Since then it has also proved its mettle since the coronavirus-induced general market dip in mid-March. Its stock dropped 25% from its February highs but has since made back the difference.
This company employs a subscription-based service for both companies and individuals, which positions it well in this digital economy. This is no more demonstrated than in the last 5 years as digitalization has soared. During this time Adobe’s revenues have compounded at a 22% annual rate, whilst its earnings growth is nearly 3 times that amount at 63%. Adobe is rising up in the ranks and looks set to continue doing so.
Another household name, PayPal is a great stock to buy as it is the market leader in digital payments. Everyone over the age of 25 will have had a PayPal account back when eBay (NASDAQ: EBAY) was at its height of popularity. Today PayPal owns Venmo, a popular P2P mobile payment app; Xoom, a worldwide funds transfer service; and iZettle, a Swedish POS system, including card reader software.
Despite having well-known competitors such as Square (NYSE: SQ) and StoneCo (NASDAQ: STNE), PayPal is slowly but surely acquiring dominance over every corner of the digital payments sector. It has a presence in over 200 markets, which includes over 100 currencies and a 60% market share. Additionally, the company is an ESG (Environment, Social, and Governance) company, using clean energy technology in its offices with onsite solar panels providing 10% of its energy. Partnered with the NGO Kiva it enables microlending for entrepreneurs in up-and-coming markets such as Latin America and India. Paypal also boasts a 45% diversity in its board members.
PayPal’s fundamentals are also strong with a 3-year sales growth rate of 17.8% and an earnings rate of 21.8%. Recently it experienced a 31% drop in its stock as part of the wider, coronavirus-induced market trend. What is impressive, however, is the recovery. Growing 120% since mid-March it has exceeded its pre-COVID-19 level. It is likely to keep growing as industry trends point towards the rising demand for faster, mobile, and internet-based transaction software.
As a profitable semiconductor company, SolarEdge has outperformed the S&P 500 (NYSEARCA: VOO) by 54% YTD. The company is clearly valued highly by its own insiders as they own over $140 million worth of shares. When those who run the company have a considerable stake in it, in my opinion, it shows confidence and a passion for the company.
In the past three years, this semiconductor company has shown a 44.3% sales growth as well as a 37% earnings growth, with a forecast for the next 1-3 years of 30%. This is after a reduction in solar panel installations due to COVID-19.
SolarEdge is notable for its innovation in power optimization by creating a cheap, yet less problematic alternative to the power transfer from DC to AC energy.
Solar panels are not the only thing this company is playing with. Acquiring Kokam in 2018, a South Korean battery company has added battery storage which can help integrate solar power into everyday power solutions. In 2019 SMRE Spa was also acquired, opening up the e-mobility market and adding its innovation and potential revenue to SolarEdge’s portfolio.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.