2020 is over, but old problems are stubbornly persisting in 2021. With a pandemic, extreme political turmoil, an economy still trying to find its way after all this, and the stock market near its all-time high, the reasons for investing can appear scarce.
But there is always an opportunity – especially when negativity is high – to buy shares in quality companies with great long-term prospects. Three Fool.com employees think Veeva Systems (NYSE: VEEV), Intel (NASDAQ: INTC)and Naspers (OTC: NPSNY) are worth it at the beginning of the new year.
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Life sciences rush to the door of “digital transformation”
Nicholas Rossolillo (Veeva Systems): The future looks bright for life science actions. For many, 2020 was a great year as pharmaceutical and biotech companies rushed to find treatments and vaccines for COVID-19. The fight against the pandemic continues. And new research and development is being directed towards innovative health treatments and patient care methods. Collectively, trillions of dollars are being spent each year worldwide to improve health outcomes. From a business point of view, there will be winners, but there will also be many losers.
That is why Veeva Systems is one of my favorite stocks for the major life sciences industries. Veeva is a way to participate in the growth of the entire universe instead of trying to bet on which companies that develop new treatments and health technologies will be the biggest winners. Specifically, Veeva provides cloud-based software and tools for pharmaceutical, biotechnology and other healthcare-related companies to manage its operations.
In addition to participating in an overall increase in life science research over time, Veeva is focused on helping these organizations make digital transformations – updating tools and procedures to new digital standards. The software company offers all types of functionality, from clinical trial management to quality control and confidential data management. It is also constantly expanding its capabilities, recently adding new features to its long-range platform, such as virtual meetings and AI integrated into its customer relationship management product. Based on its initial success as a software technologist partner for pharmaceutical and biotechnology companies, Veeva is expanding its platform to also help consumer goods, chemicals and cosmetics companies.
This is a premium priced inventory at almost 83 times the free cash flow of the previous 12 months (revenue minus operating cash expenses and capital expenditures), but for good reason. Veeva has consistently grown its sales at a double-digit percentage rate for years, a rate that accelerated in 2020 during the pandemic, and which shows no signs of slowing down as soon as the need for new digital tools remains. Simply put, this is the best deal in the class that lies at the intersection of software and healthcare.
This giant microchip fell, but it didn’t come out
Anders Bylund (Intel): Very few tech stocks seem to be good purchases now. The market as a whole looks overheated and many of my favorite stocks may be heading for a sharp correction in the not too distant future – especially in the booming technology sector. The semiconductor giant Intel is a rare exception to my abnormally bearish analysis of the current market.
Intel shares are already trading at a 24% discount from the 52-week peak because Chipzilla has been struggling to upgrade its manufacturing facilities to next-generation 7-nanometer technologies. This problem puts Intel at a disadvantage, as many of its closest rivals are producing 7 nm chips with the help of third-party chip foundries led by Taiwan Semiconductor. Investing activist Daniel Loeb is asking Intel to consider breaking its established commitment to running its own manufacturing facilities, suggesting that the company could expand its chip factories as an independent company or even sell them to Taiwan Semi and friends.
Whether or not Intel adopts any of Loeb’s ideas of radical change, Intel is well equipped for a return to full health. No one else in the semiconductor industry can match the company’s huge research and development budget, which totaled $ 13.3 billion over the past four quarters. This is more than the R&D expenses of Advanced micro devices and Qualcomm Combined. Innovation is the lifeblood of every self-respecting technology company, and Intel is taking its future-oriented development very seriously.
Intel’s shares are quoted for absolute disaster at just 10 times previous earnings and 14 times free cash flows. This is an absolute steal if you believe that Intel is putting back its derailed manufacturing upgrades, like me.
The company is due to release its fourth quarter results in a few weeks and I think it is sensible to grab some cheaper Intel shares before this business update.
Get the best China company at half the price – without investing in China
Billy Duberstein (Naspers): You don’t usually invest in a top-notch Internet giant at half the price, especially in today’s frothy technology market, but that’s exactly what investors currently find in South African investment firm Naspers.
Naspers used to be a South African media company, but has basically become a venture capital investor in emerging markets in the past 20 years. At the end of 2019, Naspers separated its risky investments, which are basically all of its assets, into a separate company called Prosus (OTC: PROSY). In the last quarter, Naspers held 72.66% of Prosus.
Prosus’ main asset is the company’s huge 31% stake in the Chinese internet giant Tencent – a stake that is now worth a whopping $ 226 billion. In addition, Prosus also has stakes in other major international food delivery companies, classifieds and digital payments, which analysts estimate may be worth another $ 30 billion.
What is remarkable is that Prosus’ market capitalization is worth only about $ 173.3 billion today, or about 32% discount on the value of its assets. Even more notorious? Naspers only trades at a valuation of $ 85.4 billion, or another 32% below its 72.7% stake in Prosus.
This all means that Naspers’ market capitalization is about half the value of its assets. And while it is difficult to say if and when that gap between assets and securities may close, Naspers / Prosus management is taking advantage, recently announcing a $ 5 billion share buyback program in November.
Tencent has come under some pressure recently, with rumors that the US government may ban citizens from owning shares in some Chinese companies. For those who want exposure to the best international growth stocks in their category, Naspers offers an indirect way to invest in Tencent without direct Chinese risk, and at a great discount, to top it off.