Making money is easy when you buy into high-quality companies on the cheap.
Investing in 2020 has been quite the adventure. Thus far, we’ve witnessed the quickest bear market decline of at least 30% in history, as well as the fastest rebound to new all-time highs from a bear market low — it took less than five months for the broad-based S&P 500 to reach new highs.
Yet, in spite of the broader market being higher on the year, there are no shortage of great stocks on sale just waiting to be scooped up by investors. If you have, say, $5,000 at the ready that can be put to work over the long-term and won’t be needed to pay bills or cover emergencies, then the following great stocks could be ripe for the picking.
First up is edge cloud platform service provider Fastly (NYSE:FSLY), which was clobbered last week after revising its third-quarter revenue forecast modestly lower. Fastly now expects to report between $70 million and $71 million in sales for Q3, which is down from its previous forecast of $73.5 million to $75.5 million in sales. The company cited demand weakness from its top customer, TikTok, as the primary reason behind its revenue revision. As some of you may know, TikTok has been threatened with a ban in the U.S. by President Trump.
While having a customer that made up 12% of first-half revenue pare back its usage is far from ideal, things aren’t nearly as dire as Wall Street might have made them appear. Even at the midpoint of the company’s reduced guidance for Q3, Fastly’s year-on-year sales will grow by 42% amid the coronavirus pandemic-induced recession.
What’s more, Fastly’s core metrics have been improving. The second quarter featured the fastest uptick in new customer add-ons since the company went public. The previous quarter also saw dollar-based net expansion rate increase 4 percentage points to 137% from the sequential first quarter. While this is unlikely to be the case in Q3, it would imply that most of Fastly’s existing clients are spending more for the company’s content delivery and security solutions.
With the pandemic pushing businesses and consumers online, the fact is that Fastly’s edge cloud solutions are going to become increasingly more important. Last week’s sell-off could be the perfect opportunity to do a little shopping.
Walgreens Boots Alliance
Another well-known company on sale right now is pharmacy giant Walgreens Boots Alliance (NASDAQ:WBA). Even after its better-than-expected fiscal fourth-quarter operating results, Walgreens has lost 36% on a year-to-date basis, and almost 49% over the trailing two years.
The issue for Walgreens is that the pharmacy-chain operating model is built on low margins and high volume. That volume dried up big time when the pandemic hit, crushing front-end retail sales and hurting clinic revenue. On an adjusted basis, the coronavirus reduced earnings per share by $1.06 in fiscal 2020.
However, Walgreens Boots Alliance is undergoing a transformation that’s already beginning to pay dividends. The company is on track to recognize $2 billion in annual cost savings by 2022, but has spared no expenses when it comes to boosting its omnichannel presence. In the fiscal fourth quarter, online sales at Boots.com and Walgreens.com rose by 155% and 39%, respectively, from the prior-year period. The company has also increased the number of items that can be picked up through mobile order and drive-thru.
Perhaps the most exciting development is Walgreens’ partnership with VillageMD to develop up to 700 on-site, full-service healthcare clinics that’ll pair with Walgreens’ pharmacy for an integrated medical experience. Walgreens’ entire strategy is based on reaching out to patients with chronic conditions and making its stores a one-stop shop for their basic medical needs.
At roughly 8 times Wall Street’s profit forecast for 2020, Walgreens finds itself on the clearance rack waiting for value investors to buy in.
Bargain shoppers would also be wise to consider investing their $5,000 into regional bank U.S. Bancorp (NYSE:USB).
There’s no question that bank stocks are getting the short end of the stick right now. The Federal Reserve has pledged to keep its federal funds rate at or near record-tying lows for the next couple of years, which’ll weigh on the interest income-earning potential for banks. At the same time, the recession has increased the need to set aside cash for an expected uptick in loan losses.
Thankfully, U.S. Bancorp is a step above the average U.S. bank when it comes to the quality of its loans and its operating approach. This is a company that has a long history of avoiding the derivative investments that wrecked the balance sheets of money-center banks during the financial crisis. By maintaining a disciplined approach to lending and focusing on the bread-and-butter of banking (loan and deposit growth), it’s been able to rebound from recessions much faster than its peers.
What’s really interesting is that, even during a recession, many of U.S. Bancorp’s important metrics are headed in the right direction. Despite an uptick in nonperforming assets, we’re seeing deposits increase from the prior-year period and sequential quarter, and witnessing an ongoing expansion of digital transactions. Over the trailing two years, the number of loan sales conducted digitally have nearly doubled to 54% from 26%. That’s great news given how much cheaper it is for banks when consumers bank online or via mobile app.
Put simply, U.S. Bancorp is a better breed of bank that’s valued at levels not seen in more than a decade. For patient investors, it’s a bargain that shouldn’t be passed up.
Author: Sean Williams
Source: The Street: Got $5,000? These Great Stocks Are on Sale and Begging to Be Bought