What makes you confident that a particular stock has a high chance of generating strong gains? Perhaps it is the previous performance of the stock. Perhaps it is a great market opportunity. The company may have a distinct competitive advantage that you really enjoy. Or you can simply have a positive instinct about the stock.
These are all answers that you would probably give when answering the question. A good exercise at the beginning of each year is to examine the stocks you own (or want to buy) to assess how confident you are about their prospects. I did that recently. Here are my three most convincing growth actions for 2021.
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1. Fiverr
Fiverr (NYSE: FVRR) absolutely crushed in 2020, with its shares skyrocketing 730%. Even with this huge gain, the company’s market value is still only $ 8 billion.
There are many websites that allow companies to find freelancers. Many of them are basically recruiting agencies. Often, freelancers need to bid for jobs and negotiate contracts. Fiverr’s e-commerce platform is different. A service-as-a-product approach is required. Freelancers post their skill sets, experience and a set price for what they will do. There is no bidding or negotiation. Buyers know exactly what they are getting with their money.
This non-bargaining approach is working very well for Fiverr. The number of active buyers of the company has increased by more than 70% in the past three years – without any sales force. Average spend per buyer increased by almost 64% during the same period. Fiverr’s revenue growth is accelerating, jumping 88% higher year-on-year in the third quarter of 2020.
The company estimates its total addressable market in the US to be around $ 115 billion annually. But that market is growing. As a result of the COVID-19 pandemic, more people are working remotely and are interested in working as freelancers to supplement their income. Fiverr is not only targeting the American market, however. It continues to expand internationally. I am very optimistic about the company’s prospects in 2021 and beyond.
2. Etsy
Etsy (NASDAQ: ETSY) inventory more than quadrupled last year. The e-commerce platform for handmade products really attracted customers during the pandemic. Etsy received a special boost from sales of face masks. But I don’t think the momentum will wane when the pandemic is over.
Of course, 11% of Etsy’s gross merchandise sales (GMS) in the third quarter resulted from sales of face masks. However, the company’s GMS increased 93% year over year, excluding sales of face masks. My opinion is that customers who were attracted to Etsy in 2020 mainly to buy a face mask are likely to return to the platform to buy other products. In other words, the pandemic will be a long-term growth driver for Etsy, rather than just providing a temporary boost.
Etsy’s biggest competitive advantage is its exclusivity. In a 2019 survey, an impressive 88% of shoppers said Etsy sold items they couldn’t find anywhere else. Etsy merchants are often small businesses, many of which sell custom craft products. This differentiates Etsy in terms of customer appeal, but also in terms of performance: Etsy’s sales are growing more than twice as fast as the Commerce Department’s e-commerce benchmark.
Despite its impressive growth, Etsy still claims only 5% of the $ 100 billion annual market for what it calls “special” products (exclusive handcrafted items). But the company’s real addressable market is probably close to $ 250 billion a year and perhaps even more than that. I sincerely hope that Etsy will continue winning this year and for the rest of the decade.
3. Intuitive surgical
Pioneer in robotic surgical system Intuitive Surgicalin (NASDAQ: ISRG) the company was hit hard by the coronavirus outbreak. Non-emergency surgeries were postponed for part of 2020. As a result, Intuitive’s revenue fell 22% year-over-year in the second quarter and 4% in the third quarter. However, its shares still jumped 38% in 2020, as investors expected better days ahead.
I think those better days will come this year. Two COVID-19 vaccines are currently available in the United States, with millions of Americans already at least partially vaccinated. There are reasons to hope that life will soon begin to return to normal. This means that delayed surgical procedures will be rescheduled.
Intuitive Surgical makes most of its revenue from the sale of replacement instruments and accessories. When more procedures are performed using your da Vinci robotic surgical systems, Intuitive’s revenue increases. I anticipate this in 2021. What really makes Intuitive Surgical a highly convincing action for me, however, is its long-term potential.
The aging of the population worldwide will increase the demand for surgical procedures. In the meantime, Intuitive continues to launch innovative new products to expand the types of procedures that can be performed with surgical robots. Intuitive’s market opportunity is huge because only a small percentage of procedures today can be performed with robotic assistance. My opinion is that Intuitive Surgical is almost an obstacle to winning in the long run.