Given the COVID-19 coronavirus pandemic sweeping the globe, it’s certainly understandable that some investors might be tempted to hunker down, keep their money in a mattress, and ride out the storm. That said, if you think the worldwide health crisis will abate and things will eventually return to normal, then that may not be the best course of action. Investing in stocks has long been the best way to generate wealth over time — and this time should be no different.
Assuming you have an emergency fund to fall back on and $3,000 (or less) that you don’t need for three to five years, here are three companies that will stand the test of time and flourish in the coming years.
Apple (NASDAQ:AAPL) was among the earliest companies hit due to the coronavirus pandemic and perhaps one of the hardest hit. The company’s manufacturing facilities in China were shuttered, suspending the production of many of its devices. That was followed by the closing of its retail stores, first in China and then around the world.
That doesn’t mean it’s game over for Apple. There will undoubtedly be several quarters of pain for the tech giant, but that could be said for so many companies these days. It’s important to remember that before the outbreak, Apple was firing on all cylinders, achieving overall record revenue and earnings, along with personal bests for its services and wearables segments.
Demand for Apple products won’t simply vanish as the result of the global health crisis, but merely be put on hold, as many analysts have suggested. This missive from Evercore ISI analyst Amit Daryanani captures the idea (emphasis mine).
Our estimate reduction is predominantly driven by [coronavirus-related] supply issues and to a lesser extent weaker demand trends in China. However, we think revenue has merely been delayed versus lost and our [fiscal year 2020] estimates are unchanged — though we concede this is a fluid situation and revenues could be pushed out further into the December quarter.
For investors that believe “this too shall pass,” Apple is a solid company with a great future. Did I mention that it has an enormous war chest of more than $99 billion of net cash on its balance sheet, plenty of reserves to ride out the storm?
Even before the coronavirus outbreak, Teladoc Health (NYSE:TDOC) was delivering solid results that had investors excited about its future potential. The virtual healthcare services company grew revenue by 27% year over year in the fourth quarter and has been accepted by a growing number of insurers who see telehealth as a convenient and cost-effective alternative to the standard doctor’s office visit. The company isn’t yet profitable, the result of expanding its fledgling business.
Teladoc’s other metrics were even more telling as subscription-access fees climbed 24% year over year and fees from digital office visits grew 47%. Total office visits climbed 44%, while paid memberships in the U.S. — its largest market — grew 61%. The company’s international presence is more established than that of its rivals, and while the expansion is still in its early stages, the company is seeing strong momentum across the global health marketplace. The recent acquisition of InTouch Health will only accelerate the company’s trajectory.
The current health crisis has highlighted the benefits of telehealth. Last month, Teladoc reported that virtual medical visits surged 50% over the prior week, as the coronavirus continued its relentless march around the globe.
Some would point out that Teladoc’s stock isn’t cheap using conventional metrics, especially considering the stock price has soared 33% over the past six weeks, even as the SP 500 has fallen more than 20%. Teladoc sports a price-to-sales ratio of 20 over the trailing-12-month period. That said, society has been given a front-row seat and is seeing firsthand why telemedicine is the wave of the future.
Lest there be any doubt, MercadoLibre (NASDAQ:MELI) was another company at the top of its game before the coronavirus reared its ugly head. The Latin American e-commerce leader delivered a jaw-dropping quarter to close out 2019. One of the biggest contributors was the company’s unrivaled success is payments. For the fourth quarter, MercadoPago — the company’s payments segment — delivered total payment volume (TPV) that grew 99% year over year in local currency, while the number of transactions grew 127%.
What drove those outsized gains? MercadoLibre’s move off-platform is gaining momentum. While it was successful as the payment method of choice on its own platform, as well as those of other e-commerce providers, things really started rolling after MercadoPago moved to brick-and-mortar stores via point-of-sale devices. Now, off-platform transactions account for 78% of its TPV growth and represented 55% of total payments, overtaking those from its e-commerce site, and growing 176% year over year in local currencies.
Some investors might be concerned about the company’s lack of profits over the past couple of quarters, but that requires an explanation. Early last year, digital payment processor PayPal (NASDAQ:PYPL) invested $750 million in MercadoLibre and established an ongoing business relationship. The company invested some of the influx of cash in a broad advertising campaign to expand its brand awareness and market share, taking a temporary toll on the bottom line.
MercadoLibre not only has a strong and vibrant technology business, but also has an impeccable balance sheet, with nearly $3 billion in cash and short-term investments and no debt.
The inevitable question among some investors is “Why right now?” The prevailing wisdom involves waiting until stocks fall further and trying to catch the bottom — particularly since the pandemic has yet to fully run its course.
While that might be great in theory, timing the bottom is far more difficult in practice. Investors that are concerned the market may have further to fall might be more comfortable using the time-honored strategy of buying some stocks now and more later — if the market does in fact have further declines ahead, effectively averaging in at lower prices.