the Nasdaq Composite (^IXIC -0.16% ) it briefly fell into a bear market last week, falling more than 20% from its peak in November. Fear that the sky was falling caused many investors to seek shelter, which is understandable given the recent market turmoil and wild volatility. Historically speaking, however, now It’s the best time to look for best-in-class stocks to add to your portfolio because every downturn is inevitably followed by a new bull market rally.
I’m not just giving idle advice, either. Just last week, I put my hard-earned money to work at five companies with three things in common: a leading industry position, significant secular tailwinds, and a large addressable market. A $100,000 investment spread evenly across these five innovative stocks could grow to $1 million by 2035.
1. The Trading Desk
At the top of my shopping list is the undisputed industry leader in programmatic advertising, the trading desk (DTT -4.31% ). The company uses high-speed computers powered by sophisticated algorithms to automate the ad-buying process, and its data-driven technology targets consumers who are most likely to act on those ads. In addition, its cutting-edge solutions led The Trade Desk to be named a Leader in the Gartner Magic quadrant for ad technology.
The tech-focused market crash sent stocks into a tailspin, but the business is firing on all cylinders (if you’ll pardon the cliche). The stock has lost about 39% of its value at the time of this writing, but a look under the hood shows why the company is a bargain at this price.
Trade Desk closed last year strong, with 2021 revenue growing 43%, while its adjusted net income rose 36%. This strong growth came even in the face of heavy investment, as The Trade Desk launched its latest state-of-the-art ad buying platform, Solimar. Additionally, its Unified ID 2.0 technology has been adopted by a broad coalition of advertisers and is fast becoming the industry standard for replacing ad tracking cookies.
The company generated revenue of about $1.2 billion last year, which is a drop in the bucket compared to its big opportunity. The global ad industry clocked in at $766 billion last year and is expected to top $1 trillion by 2025.
2. Hub Spot
From humble beginnings as an inbound marketer, hubspot ( BUSHINGS -2.25% ) has grown his software as a service (SaaS) on a full-service customer relationship management (CRM) platform. The company continues to excel when it comes to marketing, having been cited by the Gartner Magic Quadrant as a leader in business-to-business (B2B) marketing automation platforms.
But HubSpot has become so much more. The company continues to expand its ecosystem, with forays into marketing, sales, service support, payment, content management and operations solutions. Yet even as its business and opportunity have grown, the recent market sell-off has hit HubSpot hard, sending its shares down more than 44% even as its business has thrived.
Last year, HubSpot continued its strong growth, with revenue up 47%, while its adjusted net income increased 55%. The company’s customer base of 135,000 grew 30% year-over-year, and more than 60% of the company’s customers have adopted multiple hubs, propelling its net revenue retention rate above 110% for year.
The company generated revenue of about $1.3 billion last year, which pales in comparison to its growing total addressable market, which one analyst estimates at about $87 billion.
The changing face of data has largely sidelined the legacy database, as the need to store and index information goes far beyond traditional rows and columns. This includes entire documents, photos, social media posts, video and audio files, and more. MongoDB‘s (MDB -3.40% ) The cloud-native platform helps users extract and store data from a host of non-traditional sources, with a free-to-use offering that acts as a springboard to introduce potential customers to its fully managed paid services.
The company was recognized as an overall leader in cloud database providers by KuppingerCole, one of Europe’s leading technology analyst firms. Additionally, MongoDB has consistently been cited as the most searched for database by developers, according to research from Stack Overflow.
However, as technology stocks Having taken it on the chin, MongoDB did the same thing. Its shares are down roughly 30%, with no company-focused news fueling the drop. The company’s strong financial results suggest that this situation is temporary.
MongoDB closed last year in a graceful way. For fiscal year 2022 (ended January 31), revenue increased 48%, while the company cut its adjusted loss by two-thirds as it neared profitability. Not only did their customer base grow 33%, but existing customers spent more, with a net revenue expansion rate of over 120%.
This could be just the beginning. MongoDB operates in one of the largest and fastest growing markets in the industry, with an estimated total addressable market expected to exceed $97 billion by 2023. Considering MongoDB generated revenue of just $874 million in fiscal 2022, it has a long growth road ahead of it.
While most consumers have never heard of twilio (TWO -4.40% ), many of them use their services every day. The company’s in-app communication tools are the industry standard, named a Communications Platform as a Service (CPaaS) Leader by IDC MarketScape in 2021.
Twilio provides app developers with the tools they need to connect with their users. These systems provide the framework that allows customers to communicate with businesses via text, chat, video, phone, and more without ever leaving the app. It also supports things like password resets and status updates for restaurant orders, grocery delivery, and transportation orders.
The recent sell-off in tech stocks has dragged stocks down almost 60%, but its financial results illustrate why it is a bargain at these prices.
Twilio’s revenue grew 61% in 2021, though it’s still unprofitable as it struggles to carve out market share. Its customer base grew to 256,000, up 16%, while its dollar-based net expansion rate of 131% shows that existing customers are increasing their spending.
The company generated revenue of $2.84 billion in 2021, which is a drop in the bucket compared to Twilio’s total addressable market, which management estimates at $79 billion. This helps illustrate the significant opportunity that remains.
transmission pioneer Year ( YEAR -2.81% ) it has become the favorite platform among viewers to manage the growing number of subscriptions and over-the-top ad-supported services they frequent. By the end of 2020, Roku’s user base surpassed that of Amazon‘s Fire TV and never looked back. Licensed by a growing number of connected TV manufacturers, the Roku operating system continues to maintain its lead, accounting for more than 1 in 3 smart TVs sold in the US last year.
However, difficult comparisons and supply chain disruptions have had a negative effect, affecting forecasts and TV unit sales, resulting in tepid account growth. Fears of these problems becoming permanent have weighed on Roku shares, which have plunged more than 70% from their highs last year, but there are reasons for optimism.
Roku’s revenue grew 55% in 2021, while revenue from its platform, which includes digital advertising, The Roku Channel and its operating system license, increased 80%. At the same time, the company made a nice profit for the year, reversing the loss it incurred in 2020.
Growth in active accounts and streaming hours slowed in the fourth quarter, down 17% and 15%, respectively, pressured by tough trade-offs related to the pandemic and a return to normal leisure activities. That didn’t stop Roku from being the #1 streaming TV platform in the US, Canada, and Mexico, in terms of hours streamed. Viewer numbers should normalize in the coming months as supply chain constraints and compositions are relaxed.
It’s still early days for the streaming pioneer. Roku generated revenue of about $2.76 billion last year, but that pales in comparison to its market opportunity, which is expected to grow to nearly $224 billion by 2028.
the fine print
TO bear market it’s a good time to boost your portfolio’s long-term performance by buying quality stocks while they’re on sale. That is not to call a bottom or to say that the market will not fall further (it could).
It’s worth noting that neither of these stocks are cheap in terms of traditional valuation metrics, selling for between 6 and 30 times sales when a “good” price-to-sales ratio is between 1 and 2. That said, each of these stocks It possesses the rare trifecta of a leading industry position, strong secular tailwinds, and a significant addressable market, which, when combined, could deliver explosive profits.
This article represents the opinion of the author, who may not agree with the “official” recommendation position of a premium Motley Fool advisory service. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.