In the midst of all the chaos caused by the pandemic, recession and civil unrest in 2020, the stock market performed surprisingly well, despite falling sharply in the first quarter of the year. In the past 12 months, the S&P 500 increased by 17%.
Could this year be as dangerous as the previous one? This seems unlikely, but, regardless of what happens, some actions should continue to perform well throughout. Two of these actions are Intuitive Surgical (NASDAQ: ISRG) and Shopify (NYSE: SHOP). It is here that it is worth adding both companies to your portfolio to face the storms that may arise in 2021.
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1. Intuitive surgical
Any technology that improves our ability to treat fatal diseases is likely to have some success in the market. Intuitive Surgical robotic surgical devices help doctors perform minimally invasive operations. In comparison with open surgery, these procedures result in smaller incisions, shorter hospital stays and faster recovery times. In other words, both the patient and the hospital benefit immensely from these devices.
Intuitive Surgical markets the da Vinci robotic surgical system, one of the main devices of its kind on the market. As of December 31, the company had 5,989 da Vinci systems installed worldwide, representing a 7% gain over the end of 2019. The number of elective surgeries actually performed with the crown jewel system has dropped as a result of the pandemic , damaging your top line.
General revenue also fell 3% in 2020 compared to the previous fiscal year. The company will continue to deal with these headwinds during the pandemic, but in the long run, it should be okay, for some important reasons.
Image source: Getty Images.
Intuitive Surgical is building a powerful competitive advantage. The company benefits from the high switching costs: once a hospital spent between $ 500,000 and $ 2.5 million to purchase the da Vinci System, it spent long hours training its staff on this device and spent even more to buy the accompanying instruments, switching to a competing machine is an expensive proposition.
Even in the event of technical problems with the da Vinci, it is easier for hospitals to fix it than to replace it. Intuitive Surgical also provides maintenance services to its customers. Thanks to these factors, the healthcare company must retain the majority of the customers it already has.
And it has already overcome a number of regulatory hurdles to launch the da Vinci System on the market. The stringent regulatory framework in the healthcare industry is a bonus for companies that are already well established, such as Intuitive Surgical.
The company is expected to continue to profit from increased adoption of robotics-assisted surgery, which is expected to grow at a compound annual rate (CAGR) of 19.9% between 2021 and 2026, according to research firm Mordor Intelligence. And as the population ages, the need for innovative devices like the da Vinci will only increase. These favorable long-term winds should provide Intuitive Surgical with sufficient fuel to continue to rapidly increase its revenue, profits and share prices.
2. Shopify
The e-commerce space is packed, with dozens of companies fighting for supremacy. Shopify has achieved tremendous success in this sea of competitors by advertising itself as a one-stop shop for small and medium-sized businesses looking to build an online presence. Shopify makes it easy for them to sell and ship your products, process payments and more.
The company has also built a competitive advantage: like Intuitive Surgical, it benefits from high switching costs. It is expensive and time consuming for companies to create an online store and attract customers. After going through this process, few business owners would like to switch platforms and start from scratch, meaning that Shopify is likely to retain most of its customers.
It continues to record excellent financial performance. During the third quarter, which ended on September 30, its subscription solutions revenue increased 48% year-over-year, to $ 245.3 million, in part due to the increased number of merchants on its platform.
Tech company merchant solutions revenue increased 132% to $ 522.1 million, thanks to the growth in its gross merchandise volume (the total value of items sold on its platform). Its total revenue increased 96% year on year, to $ 767.4 million.
Image source: Getty Images.
Unlike Intuitive, Shopify received a boost because of last year’s pandemic, as consumers were more dependent on online shopping. But investors have grown accustomed to incredible revenue growth over the years, and that trend is not about to end. Analysts see the company’s revenue increasing at an average rate of 105.4% per year for the next five years.
The U.S. Department of Commerce says e-commerce accounted for only 14.3% of total sales in the third quarter. As that number continues to grow, more merchants will seek to reach customers online and many of them will undoubtedly turn to Shopify. These factors make it an excellent action for anyone trying to crush the market from now on.