It’s been a rough quarter. The market just can’t catch a break it seems. Volatility all over the place, people jumping in and out of positions, inflation talk everywhere. And, considering all of this, what we’re seeing in the new earnings reports shouldn’t really come as a surprise. Even the biggest names out there were hit by this hard (even though some companies took it easier than others). This is exactly what you’d expect to see in a situation like this.
Is it all bad though?
Not really, no. If anything it should serve as a lesson. Because despite all of the turmoil, there’s still incredible opportunities out there. It just comes down to knowing how to pick your stock. Knowing how to find the good companies. And by good companies, here of course, I mean the businesses that you want to hold for years and years down the line.
So, in today’s blog, we’ll talk about the top three stocks for this month. Oh, and before you ask, we were never really all that interested in Twitter from an investing point of view, but now after the interest showen from Elon Musk, we have opened a small position. We know that there’s a big potential there, and now they can be our cup of tea. We also prefer businesses that we understand, which is why today we’re going to be looking at:
- MasterCard (MA)
- Arista (ANET)
- Tesla (TSLA)
And, if you stay with me until the end, we’ve also got two bonus suggestions for you!
So, without further ado, let’s dive right in.
- Current Price: $363.38 ((today change: -15.45 (-4.08%))
- Market Cap: 371.403B
- PE Ratio: 41.48
- EPS: 8.76
So, let’s start things off with Mastercard (ticker symbol MA). 2021 was an excellent year for MasterCard. The company saw revenue growth of over 22% despite the inflation and rising operational costs. Additionally, management was able to push operating income up by 25% and net income by 35%, generating over $9.5 billion in operating cash flow. And, as if all of that wasn’t enough, Mastercard also paid out over $1.7 billion in dividends.
Of course, management is not sitting on their hands – they’ve been hard at work leveraging their substantial cash flow for the benefit of the shareholders. And they’re doing this not just by paying dividends but also by reinvesting back into the business.
A prime example of this is the Mastercard Instalments programme that provides customers with convenient Buy Now Pay Later plans (BNPL). Given the shaky economic situation and all of the uncertainty going around, it’s easy to understand why there is so much hype surrounding BNPL. As an established leader in the financial services field, Mastercard is in a position to benefit greatly here.
And, yes, credit cards are technically a BNPL mechanism by default. Still, Mastercard aims to make things as accessible and easy to use as possible. In their own words, the Mastercard Installments programme is explicitly designed to “give customers more payment choices when they shop”. Backed up by their solid reputation and long years of prominence in the field, this is certainly going to give them a leg up on the competition.
All in all, the business is looking really stable. So, despite all of the buzz about potential market problems and inflation, we believe that MasterCard has proven itself as a reliable company and one that we are more than happy to invest in.
- Current Price: $115.57 ((today change: –5.34 (-4.42%))
- Market Cap: 35.515B
- PE Ratio: 43.94
- EPS: 2.63
Arista, ticker symbol ANET is a computer networking company based in California. With over 18 years in business, Arista Networks has established itself as a major supplier of Ethernet switches and routers, primarily used in data centres, campuses and HFT (high-frequency trading) environments. The firm also owns the patent to the Extensible Operating System (EOS) – their very own highly compatible Linux-based operating system.
Since 2018, the company’s market cap has more than doubled. This is clearly reflected by the historical volatility of its share price. They also gained some rather significant clients – in 2019, Microsoft and Facebook (or Meta Platforms as it is called today) accounted for about 40% of its total revenue.
According to the latest proxy statement, the three core founders of Arista Networks still hold significant stakes in the business, adding up to about 26% of all outstanding shares.
- Current Price: $870.76 ((today change: -6.75 (-0.77%))
- Market Cap: 902.116B
- PE Ratio: 177.67
- EPS: 4.90
Next, we’ve got Tesla (ticker symbol TSLA). Now, I know that you’ve probably got really tired of hearing about Elon Musk during these past few weeks. However, despite all of the controversy surrounding his move to purchase Twitter, Tesla is still an excellent company with a bright future. Again, we’d like to remind you that when we think about this business, we are looking at the long term. The really long term. We respect the vision of eco-friendly energy and accessible EVs, and this is why we are putting our money here.
Sure, their short term is looking shaky – there’s no way around it. Musk is a big Twitter user and likes to express his (often controversial) opinions there, which always impacts Tesla’s stock price. Still, things are always volatile around Tesla, even during the periods when Musk does and says nothing controversial. And that’s entirely reasonable – that’s just what happens when you’re trying to develop technological innovations. There will always be believers and naysayers. This isn’t something that’s exclusive to Tesla.
And besides, we see no reason to believe that Musk’s purchase will distract him from the greater goal. Social Media is important and potentially profitable, but the technology developed by Tesla is the real “long term”. There will always be social media platforms and networks. The digital landscape will continue to grow, change and evolve alongside the users’ needs. Platforms will come and go. But out there, in the real world, people need energy solutions. And between Tesla’s leading role in the western EV market and the significant growth spurt that we observed during these past few years, I’m sure that Musk understands this as well.
And before we wrap things up for today, let’s take a quick look at the two bonus stocks. This month, we will go with two of the favourite safe & reliable picks – PayPal and Google. Now, we’ve talked about these two companies a lot, so I’m not going to bore you with the details. So instead, we’ll briefly touch on the latest developments for Q1, and we’ll call it a day.
- Current Price: $2,299.33 ((today change: -88.90 (-3.72%))
- Market Cap: 1.508T
- PE Ratio: 20.49
- EPS: 112.20
Now, we know that Google’s latest earnings report wasn’t all that amazing, but here’s the thing – we are in it for the long term. And is there really anyone out there who can realistically compete or deliver a product even remotely as convenient? Not really, at least not in the foreseeable future. The short-term earnings might be a miss, but the long-term services are definitely a hit, and they’re backed up by one of the most resilient moats in the field right now. For most people, Google IS the internet. They don’t really make a distinction (which can be an issue of its own in some instances, but that’s an entirely different topic). Their services are just too reliable and convenient, both for individual users and businesses. And that’s precisely what we look for in a long-term investment. We want something well established, something that we know will continue growing despite any short-term turbulence.
This is why the numbers don’t worry me at all. It’s actually the exact opposite. Whenever we see the stock price dropping due to some short-term hiccup like this report, we immediately look to add more of it to our portfolio. And that’s what I’m doing this month.
- Current Price: $87.93 ((today change: -4.16 (-4.52%))
- Market Cap: 102.113B
- PE Ratio: 24.98
- EPS: 3.52
For the first quarter of 2022, PayPal reports the following:
- Revenue grew by 8% (to 6.5 billion dollars), surpassing the 6.4 billion forecasts
- Adjusted earnings were in line with the expectations at 88 cents per share
- Active user accounts grew by over 2.4 million (for a total of 429 million)
- Payment volume is up by 13% to 323 billion dollars
In his statement, PayPal CEO Daniel Schulman points out that he’s pleased with the results and determined to continue improving. And, with the stock market being the way it is right now, I’m entirely on board with that idea. We are all for steady and reliable long term growth, and PayPal gives me exactly that.
And that’s about all we’ve got for today, folks. And, yes, we know that we’ve already talked about most of these businesses before, but that’s actually something that often happens in long-term investing. You find a couple of outstanding companies that fit well with your strategy, and then you follow them closely.
And we don’t know about you, but we’d much rather keep an eye on a few dozen excellent businesses with good track records than chase the latest overhyped “incredible opportunity”. That’s not really us. We are in this for the long game.
Now, if you enjoyed this blog, please make sure to let us know by dropping a line in the comments section down below, hitting the thumbs up button, signup to our newsletter and all of that good stuff. Also, if you’ve got any questions or ideas, you can put them in the comments or find us on social media (as always, the links are in the description). You can check out also our previous blog such as “What Should We Expect From Tesla’s Earning Score?”.
If you’re interested in more in-depth information and specialised content, you can always come check out our Private Investing group (again – the link is in the comments as usual). We’ve got a ton of exclusive content, special courses, free ebooks, live discussion and more!
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Thank you all for watching, and until next time!
Recommended books for further reading:
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- The Stock Market Investing Guide #2020: From Beginner to Intelligent Investor within 30 Days – How to Save Money, Generate Passive Income and Reach Financial Freedom
- Shares Made Simple: A beginner’s guide to the stock market
- How to Make Money in Stocks: A Winning System In Good Times And Bad
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