Let’s face it, February can be a rough month. The holiday cheer has long faded away, and springtime still feels more like a distant dream than a coming reality. But there’s a silver lining to February’s gray clouds, and it’s the fact that now is the perfect time for investors to consider buying the stocks mentioned below.
All of these companies have either established themselves with stellar businesses or are quickly building out their position in new markets — and sometimes a little bit of both. So put away your natural-light therapy lamps for a moment and take a closer look at why Motley Fool contributors think ANGI Homeservices (NASDAQ:ANGI), CareTrust REIT (NASDAQ:CTRE), Anaplan (NYSE:PLAN), Medical Properties Trust (NYSE:MPW), and Netflix (NASDAQ:NFLX) are top stocks to buy this month.
An overlooked e-commerce marketplace
Jeremy Bowman (ANGI Homeservices): One of the best business models of the digital age has proven to be the online marketplace. This is the formula that has helped make Amazon one of the most valuable companies of all time, made eBay a cash machine since the dawn of the internet, and has driven the boom in Etsy‘s share price in recent years.
However, one stock that’s struggled since it emerged from the combination of HomeAdvisor and Angie’s List in 2017 is ANGI Homeservices. Like other marketplaces, ANGI connects buyers and sellers, in this case looking for cleaning, plumbing, and general contracting, among dozens of other service categories. For ANGI, this creates strong competitive advantages, through network effects that make the overall marketplace stronger with each new user, and switching costs that help keep service providers on the platform.
That model and the secular growth in online home services, which is expected to continue as more millennials buy homes, is one reason the company is targeting long-term revenue growth of 20% to 25%. However, now could be an excellent time to buy shares of ANGI as its fourth-quarter earnings report is on tap Feb. 5, and the stock is still trading at a discount from last summer after a temporary challenge caused shares to tumble.
In August, the stock plunged as the company slashed its profit guidance due to marketing error related to Google’s algorithm. ANGI recovered some of those losses after its third-quarter earnings report, but the stock would still gain nearly 50% if it recouped those August losses. The February earnings report presents a good opportunity to do that as the company can put the recent marketing-related headwinds further behind it, and it will give guidance for 2020, a year that management said it would be “investing into success.”
Meanwhile, the overall economy remains strong and interest rates are low, favoring a strong housing market. Its long-term growth remains appealing with its leading position in online home services and the demographic shift in home ownership toward millennials.
My top stock to profit from America’s biggest demographic shift
Jason Hall (CareTrust REIT): At their peak, America’s baby boomers were the most populous generation in the country’s history. It wasn’t until 2019 that millennials became the largest living U.S. population cohort.
Here’s the thing: I’m not going to pitch you on some investment based on the growing role millennials will play in driving the economy. I think a significant — and potentially overlooked — opportunity is to invest in meeting the growing need to house and care for a rapidly growing senior population.
And the growth of America’s senior population is simply enormous. From 2010 to 2030, the 65-plus cohort will double from 40 million to 80 million, while improved health outcomes and better medical care will more than double the 80-plus population over the same period.
CareTrust is positioned to be a big winner from this trend, developing and acquiring skilled nursing and senior housing properties to meet the needs of this growing population. It’s already proven a huge winner since going public, more than doubling the number of properties it owns, and generating almost 300% in total returns.
More recently, the share price has fallen from the all-time high reached in 2019, pushing the dividend yield back above 4%. Considering the strength of its balance sheet — it’s one of the least-leveraged healthcare REITs out there — the opportunity for many more years of growth, and the recession-resistant nature of its business, CareTrust is a buy-now stock in my book. But don’t just take my word for it: CareTrust makes the cut as a top stock to buy in 2020.
Cloud-based planning, made simple
Todd Campbell (Anaplan): In the past, financial planning required time-consuming coordination between multiple departments, such as sales, finance, operations, and the supply chain. Because data necessary for better planning was often siloed within different data solutions, such as legacy software applications or one-off Excel spreadsheets, getting mission-critical data from disparate teams could takes weeks or longer, resulting in planning decisions that were already behind the curve. That’s far from ideal — especially since business trends are moving increasingly faster and profiting from them is becoming more complex.
To break down barriers and increase the speed of planning, Anaplan markets a connected-planning solution that unifies data into one simple system that’s instantly accessible to everyone and responsive to changing inputs. Its ability to help managers make better decisions more quickly is resonating with enterprises that are increasingly deploying Anaplan throughout their business.
In the third quarter, total revenue was $89.4 million, up 44% year over year. Anaplan’s dollar-based net expansion rate (year-over-year same-customer spending) has exceeded 120% for over three consecutive years, including a 123% rate in Q3. Importantly, Anaplan is landing more big customers. The number of enterprises spending more than $1 million per year with Anaplan jumped 57% year over year in the quarter, and 324 of its 1,300 customers are now paying Anaplan over $250,000 per year, up from 228 customers the previous year.
Anaplan isn’t profitable yet, but it may only be a matter of time before the it’s in the black. Its operating margin improved to negative 9.9% in Q3 from negative 29.5% the year before, and its gross margin jumped 3.4 percentage points to 76%. Since the Forbes Global 2000 is the company’s target market, there’s plenty of business still left to win, and given how many of its existing customers are spending more every year on Anaplan’s solution, I think there’s good reason to be optimistic.
Healthy returns from hospital real estate
Matt DiLallo (Medical Properties Trust): Medical Properties Trust is a…
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