The roaring 20s are upon us, and the investment opportunities set in front of us are exhilarating. This new decade has a lot in store for us with tech as the driving force behind it.
FAANG was the acronym that drove the stock market to continuously new highs over the past decade: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google aka Alphabet (GOOGL). This is an acronym that I am sure you are familiar with. These stocks’ exponential returns may be exhausted, and a new set of equities are ready to take their place. It is time to look for the new “FAANG”.
When assessing “market-shifting” companies, you need to look for firms with an exciting product offering characterized by longevity and a substantial total addressable market (TAM). Firms with savvy management teams that are able to navigate through both the best and worst times nimbly.
I have chosen a new acronym of stocks that I believe could change the world in the roaring 20s. The companies include Crispr (CRSP), Sea Limited (SE), Alibaba (BABA), Nvidia (NVDA), and Splunk (SPLK) or SCANS, as I like to call it.
Here I will give a brief introduction of each stock and explain why I believe these shares will drive the market in this new decade.
Sea Limited (SE)
Sea is the leading internet company in Southeast Asia and Taiwan. These economies are digitalizing at an exponential rate, and Sea is well-positioned to take on the quickly expanding addressable market. The company operates three market leader segments, including an ecommerce platform, a digital entertainment division, and a digital payment company (Shopee, Garena, and AirPay, respectively).
The internet economy in Southeast Asia has tripled in the past 5 years to $100 billion and is expected to triple again by 2025 to $300 billion. Sea is growing at an even faster rate, with year-over-year topline appreciation in the high triple-digit percentages as the company continues to take an increasing amount of market share.
Sea Limited is going to be the tech powerhouse that helps turn the third world economies of Southeast Asia and Taiwan into digitalized world markets.
CRISPR is a biomedical firm that is on the verge of changing the world. This company can edit an individual’s DNA, an achievement that is going to change modern medicine. This technology could be used to cure almost any disease if it is successfully implemented. What CRISPR’s gene therapy does is splice out the bad or disease driving DNA and add healthy strands. The company is also a leader in regenerative stem-cell medicine, which could save the lives of 100s of thousands.
CRISPR has an established portfolio of life-changing therapies in its pipeline at various stages of development. Hemoglobinopathy is the closest to commercially viable and is currently in clinical trials. If it passes clinical trials, I see this stock jumping substantially.
These shares are still a risky asset considering the possibility that none of its gene-therapies make it past the clinical stage. Based on early trials, it appears that the therapy does indeed work, and this potential has begun to be priced into CRSP. The stock has appreciated 350% since it went public in late 2016, and I believe that this is just the beginning of its growth. The ability to change an individual’s DNA is going to change the world of medicine.
The Amazon of the East has been driving substantial growth, but I don’t believe that investors are correctly valuing Alibaba’s fundamentals. BABA is trading at roughly 1/3rd of Amazon’s forward P/E valuation (seen below), despite achieving wider margins, stronger profitable, and a greater growth outlook. Alibaba is operating in one of the world’s largest and fastest-growing consumer markets (China).
Alibaba controls not only China’s ecommerce market but also its cloud computing space with a 47% market share. Its cloud computing space has the most room to run as China’s cloud infrastructure continues to expand at an exponential rate – high double-digit to triple-digit percentages.
Alibaba still has some geopolitical risk due to the US-China trade war, but as far as this next decade’s biggest equity drivers, I would replace AZMN with BABA in my portfolio.
This is the most exciting chip maker in the world today. Nvidia is known for the invention of the GPU, which is a chip original purposed for image rendering, but Nvidia has taken its capabilities far beyond this. Nvidia’s chips are hyper-fast and slowly becoming smarter as the technology develops. Its chips are becoming a necessity in data centers and are an essential element of AI development. I believe that one of Nvidia’s integrated circuits will be apart of the first true AI, which is going to change the world.
Nvidia is also leveraging 5G with its anticipated cloud gaming platform. Like cloud computing is the future of business data and analytics, cloud gaming is the future of gaming. Nvidia is making a big bet in this field with its cloud platform, GeForce NOW. This platform allows gamers to use their Macs or PCs for gaming anywhere with the high-speed, low-latency technology of Nvidia’s GPUs without needing Nvidia’s hardware locally.
Nvidia is undoubtedly a company of the future, and despite its 4-digit gains over the past decade, I believe that this stock still has legs to run. I don’t think that the company has scratched the surface of what its chips could do.
Splunk is a platform that helps companies utilize real-time machine data for collection, indexing, and alerts, allowing companies to uncover actionable insight from this data no matter the source or format. The company is leveraging AI and machining learning for forecasting and anticipative decision making.
Real-time data management is becoming increasingly necessary in business across industries as this digital age makes speed a competitive advantage. Splunk is well-positioned to take on the massive addressable market that is yet to recruit Splunk’s services. This firm is well-suited to transform the way our economy utilizes real-time data.
The market driving stocks will undoubtedly make excellent long-term investments for the “roaring 20s”. “SCANS” will be a force to be reckoned with in this next decade. Short term volatility in these stocks shouldn’t cause you to shy away from their long-term potential. I believe we may be on the edge of a market correction, so if you are worried about short-term earnings, I may wait for a pullback. If you are a long-term investor that is willing to ride this decade’s waves, I wouldn’t hesitate to pull the trigger on these stocks.
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Click to get this free report Splunk Inc. (SPLK) : Free Stock Analysis Report Sea Limited Sponsored ADR (SE) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Netflix, Inc. (NFLX) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Facebook, Inc. (FB) : Free Stock Analysis Report CRISPR Therapeutics AG (CRSP) : Free Stock Analysis Report Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research