Bruised but built to last: 12 stocks to own

When you're investing, sometimes stocks can take a hit. The question is, do you own names that can get back up? Today, we're going to tell you about a dozen stocks that are off their highs that a top investor thinks are built to last. So let's get started. This is Ticker Take. Nice technique, Caroline. Thanks, John. You always got to be ready for the ring. The boxing ring. Well, and the investing ring. Ah, yes, yes, you definitely do. In this kind of market, there's lots of volatility. Yeah, and that's why we wanted to talk to Thomas Martin. Yeah, Thomas has had lots of success investing in dozens of companies that have outpaced the S&P 500. But sometimes when you're invested in that many names, there can be names that can underperform. So today, he's going to tell us about stocks that are in the portfolio that are off their highs, but he still has a deep level of conviction around. Yeah, and before we get to today's stocks, let's get some more context from Thomas on what's been going on. What we're looking for is companies that are sustainably going to do well, meaning they're going to grow their revenues, they're going to increase their margins, they're going to increase their business. And that's going to come through in the earnings per share, where they actually grow those earnings and where they do better than what the street is anticipating. That's where the rubber meets the road. And there's a lot of things that go into trying to find those companies. But that's what we're looking for. Sometimes those companies, you buy them and the thesis comes into question. You know, they have a rough spot and then you have to make a determination as to whether or not that's something that derails the strategy for a while or for their strategy. And maybe you sell it and come back or you don't come back at all or whether it's something you need to stick to and give them the benefit of the doubt and keep monitoring it. So that's how we go about it. So, as Thomas said, sometimes built to last companies can get bruised. Oh, so to that point, what do you look for in a company that is truly built to last, that can get through those momentary hiccups? We asked him about that, too. The thing that we're looking for is a business model where, you know, if we can find it, where they've got something that somebody else doesn't have or they're the leader in that business and that they continue to innovate. So, you know, one of the names on the list is Spotify. And, you know, some of these companies get recognized pretty well and everybody wants to own them. And then the stock goes up a great deal. And you could say the stock gets ahead of itself as a lot of these things start to come through. And some of those new businesses or ways to get and increase their total addressable market or to monetize, etc., in the case of Spotify, keep on surprising investors in the street on the upside until you get to some point where they've reached somewhat close to critical mass. Now, nobody knows when they're going to get there and people think they've already gotten there along the way. So you want to stick with it, even as the valuation gets to be a little bit trickier. But then at some point there's, you know, there's a hiccup or, you know, they say they flatten out and then everybody thinks it's over. So you have to look at those businesses and see, do they still have the competitive advantage? Do they still have the drive within the company to innovate and to change the company to meet the changing market? And that's what we think is happening with Spotify. Stock got way up. It's corrected probably correctly for valuation and then to make sure that the company has still got what it takes to be a good investment going forward. All right. With all that said, let's get to Thomas's list of 12 stocks. But first, a friendly reminder, this is not financial advice. Stock number one, Applovin. Remember, for the longest time, it felt like people couldn't get enough of this stock. Recently, it's been the complete opposite. Let's get his take on Applovin. In the software sector, Applovin is a company that is geared towards basically advertising, and they started off with the gamers. And the thesis is that, you know, they have a good business there, sort of a unique opportunity set, better technology. And they're trying to expand that into regular old e-commerce. So some of the things that Meta or Amazon or Google are in, you know, be a miss. All right. But if they can get a portion of that, they can really increase their growth rate and they can really grow their earnings from there. So that's the thesis for Applovin. It's a small stock. It's had some controversy. There have been some short reports written about it. And whenever you have that, you know, it calls into question things that people just have difficulty at getting the information on to begin with. The company has addressed those concerns. We think that they're on their way to continuing with their thesis of getting into the e-commerce market. Stock number two, Carvana. This stock surged, then it had a near-death experience, it felt like. Then it surged again, and then it's been rocky more recently. Here's more from Thomas. Carvana is a totally online buying of cars. And that company, that business model is, you know, it doesn't seem like it should be unique, but it's fairly unique. And they're the ones that have been best able to execute on it. Now, that wasn't always the case. A couple of years ago, the company really had some struggles and, you know, almost, you know, came close to going off the air. So the management did make a lot of changes to the business, and they are now closer to their customer, easier to use, better sourcing at their vehicles, and better at delivering those vehicles and delivering the kind of customer experience that people talk about and want to come back to. So that stock, again, kind of like Spotify, you know, went up from the depths, and everybody kind of got on the bandwagon. You know, it is a consumer company. Cars are expensive things that people have to buy, and when you have economic concerns, et cetera, and then, you know, you wonder if the sales trends or margin trends are leveling out, do they still have what it takes? We believe that they do, and the stock has been unfairly punished. And it's still a good holding in our portfolio, and so we're still very positive on that company. Stock number three, Robinhood. Well, a company that really benefited from the do-it-yourself investor boom, especially with more people buying into crypto this year. Stock has had lots of challenges, but Thomas is still positive on it. Here's why. Robinhood is one of those new companies that is disruptive to the brokerage business, and they focused on new investments. So whether that is crypto, or it is betting markets, et cetera, but they really are servicing a younger customer, and so they have an addressable market that is growing and enthusiastic. The reason the stock has gotten hit, again, everybody recognized it, it got bid up, and then when you had the crypto winter started, and people are concerned that if that goes away, that's going to significantly reduce Robinhood's growth rate. We think that that is not going to go away, and that it's still a good investment. Stock number four, MongoDB. All right, let's get Thomas' take on that one. So this is a software database company that is related to the AI trade, and it's one of those companies in software, which is pretty hated right now, particularly as being a disrupted industry from AI. Now, some of these things are, and it's more easy to see that their growth rates could be lower, but Mongo is a database company that is actually geared towards taking advantage and being an AI enabler. But that has been drawn into question, even though the company's earnings reports lately have been good. So it's more of a fear factor than it is a real factor in our view, and so we still think there's tremendous opportunity for them going ahead. Stock number five, Microsoft. Like a lot of big tech companies, Microsoft has struggled. At the same time, it had such a huge run previously, and still has a lot of revenue upside in the next few years. Let's get some more perspective from Thomas. It's a huge company, and it has a lot of different aspects. It's involved in AI. It's involved with open AI, et cetera. They have their cloud business, which is growing hugely. It's more of a conservative investment. It just really hasn't kept up. I don't think that it's been any kind of disaster, but the question of the growth rate and the competition is always to the fore. We think this is one of the bigger winners over time and deserves to be a core position in a portfolio. We think that it will continue to take advantage of all of the opportunities it has as a result of its size and capital and investments. Stack number six, Oracle. Oracle has definitely had a bit of a roller coaster ride, to say the least. Let's get some more perspective on the outlook from Thomas. Oracle, which was previously known as a database company and also got into the cloud business, and now is kind of all in on data centers and AI and providing for that. They really are the investments and capital investment dollars. They were the ones that I think scared the market the most as to whether or not these investments would pay off. Would they get the revenues? Would they be able to get the revenues from the other companies and then generate the revenues themselves? We believe that they do have the ability to do that and the stock's off. Again, we're holding on to that one. Stock number seven, Palo Alto Networks. Continues to be one of the leading companies in the world of cybersecurity. Let's get some more on Thomas's take. Palo Alto and the whole cybersecurity area has come under pressure along with the other software companies as the question is, can AI basically rewrite that or re-compete that or slow down their ability to build out their platform and to have a longer-term growth rate that's in line with what they've had? That's a question for a lot of the companies in the business, but Palo Alto is one that we feel is far enough along on their platformization and their ability to incorporate AI themselves that they will be a winner. Stock number eight, Palantir. Well, when you look at the analyst calls for growth over the next few years, Palantir is still a standout in terms of their business. It's just getting started. Let's get more from Thomas. Palantir, again, has been one of those software companies that really captured people's imagination with huge growth rates, huge contracts with the government and then corporations and a business that is somewhat mysterious, but seems to be very much needed. They keep on surprising to the upside in terms of the contracts that they announce and the revenue growth rate that they're able to generate. We think that they do have a business model there and a culture that projects forward engineers into the companies that they service and the opportunities that they service that is a competitive advantage, which will keep them able to keep their growth rate up. So we like that one too. Stock number nine, S&P Global. The company behind the S&P indices. Let's get more from Thomas. A company that has taken a hit as a result, again, of AI fears and can these coding things take over some of the businesses that S&P Global has. But the business that they have is proprietary information that they go out and have boots on the ground and gather and then manipulate with their software. We think that their moat around their boots on the ground operations and the information that they gather, this proprietary accounts for most of their business and is not nearly as at risk as simply software. So we think that they're going to be able to continue to take advantage of this business that they've built up over the years. Stock number 10, Spotify. The big player when it comes to music streaming. Let's get Thomas' take on Spotify. Another company that we like that has gotten a little bit tied up in the AI trade is Spotify. What they do, obviously, is they let you listen to a bunch of music from a bunch of different artists. And is the world changing where people want to make their own music, whether it's brand new music from AI or from just manipulating music that's already there, and then that'll Spotify's business go away. I mean, I don't think anybody really knows the answer to that, but Spotify is not sitting still. Their culture is one of adapting to change and again, finding what their customers need, providing it to them in a way that is easy for them to use. We think that that company will continue to be able to execute on that. Stock number 11, Uber. A company that is still very much in profit growth mode right now. Let's get Thomas' take. Uber is a company, again, that is a disruptor and leader in their business. I think what people may not recognize is that the biggest advantage that they have is their software and their logistics and their ability to organize all of these rides across all of these areas. And so the fear has been, and it has been for years, is automated vehicles. And does that destroy their business? Well, it's turning out, and we have thought that they will be able to incorporate that in and use the best parts of their logistics and organization to be able to do deals with these companies to be able to not only not be put out of business by them, but to take advantage of that and have that be an ongoing part of their business. So we think Uber is sustainable and will be able to work through this given their culture and their focus on changing their business. And stock number 12, Visa. Well, this continues to be one of the most profitable businesses on the planet. So let's get some perspective from Thomas. AI is a disruptor, but crypto is certainly a disruptor. And it's not just Bitcoin or those kinds of coins, but also stablecoin and changing the whole rails of transactions that take place in the payments business and not just credit cards. But Visa and MasterCard are really not just entrenched from the standpoint of they can't be put out of it, but they are constantly evolving and have many, many relationships and interrelationships and ways of using their market power to be able to continue to create value for their customers. So we believe that they are going to be able to continue to do that and be a payments processor of choice that can be profitable going forward. Our thanks to Thomas for sharing his list of stocks. Where we've got plenty of ways to connect with Ticker Take from the podcast edition to our free weekly investing newsletter. And make sure to subscribe so you don't miss our next amazing video. See you next time.