What makes you confident that a given stock has a great chance of making strong profits? Maybe this is the stock’s past performance. Maybe this is a great market opportunity. The company can have a clear competitive advantage that you really like. Or you could just have a positive gut feeling about the stock.
All of these answers I will probably give if I respond to the question. A good exercise at the beginning of each year is to go through the stocks you own (or want to buy) to determine how confident you are in their prospects. This is what I did recently. Here are my three growth stocks for the highest conviction for 2021.
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1. Fiverr
Fiverr (NYSE: FVRR) absolutely crushed it in 2020, with its shares soaring 730%. Even with this huge profit, the company’s market capitalization is still only about $ 8 billion.
There are many websites with which entrepreneurs can find freelancers. Many of them are basically staffing agencies. Freelancers often have to bid on jobs and negotiate contracts. Fiverr’s e-commerce platform is different. It follows a service-as-product approach. Freelancers put their skills, experience and a fixed price for what they are going to do. There is no bid or negotiation. Buyers know exactly what they are getting for their money.
This non-negotiable approach works very well for Fiverr. The number of active buyers has increased by more than 70% over the past three years – not a salesperson at all. The average expenditure per buyer increased by almost 64% in the same period. Fiverr’s revenue growth is accelerating and rose 88% year-on-year in the third quarter of 2020.
The company estimates its total accountable market in the US is approximately $ 115 billion per year. But this market is growing. As a result of the COVID-19 pandemic, more individuals are working remotely and are interested in freelance to supplement their income. However, Fiverr is not just targeting the US market. It continues to expand internationally. I am very optimistic about the prospects of the company in 2021 and beyond.
2. Etsy
Etsy (NASDAQ: ETSY) its stock more than quadrupled last year. The e-commerce platform for handmade goods really clicked with customers during the pandemic. Etsy in particular got a boost from the face mask sales. But I do not think the momentum will disappear once the pandemic is over.
Certainly, 11% of Etsy’s total gross merchandise sales (GMS) in the third quarter resulted from face mask sales. However, the company’s GMS increased by 93% year on year, excluding sales of face mask. My opinion is that the 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 for Etsy rather than just a temporary boost.
The biggest competitive advantage for Etsy is its uniqueness. In a 2019 survey, 88% of buyers said that Etsy sells items they could not find anywhere else. The retailers on Etsy are usually small businesses, many of which sell personalized handmade products. This sets Etsy apart in terms of customer appeal, but also in terms of performance: Etsy’s sales are growing more than twice as fast as the e-commerce benchmark at the Department of Commerce.
Even with its impressive growth, Etsy still claims only a 5% stake in the $ 100 billion annual market for what he calls ‘special’ products (unique handmade items). But the company’s real target market is probably closer to $ 250 billion a year and maybe even more than that. I fully expect Etsy to continue its winning streak this year and for the rest of the decade.
3. Intuitive Surgical
Pioneer of robotic surgical systems Intuitive surgicalsay (NASDAQ: ISRG) business was hit hard by the coronavirus outbreak. Non-emergency operations were postponed for part of 2020. As a result, Intuitive’s revenue declined 22% year-on-year in Q2 and 4% in Q3. However, its shares continued to rise by 38% in 2020 as investors looked forward to better days ahead.
I think those better days will come this year. Two COVID-19 vaccines are currently available in the US, with millions of Americans being at least partially vaccinated. There is reason to be hopeful that life will soon 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 the da Vinci robotic surgical systems, Intuitive’s revenue increases. I foresee that this will happen in 2021. What makes Intuitive Surgery such a high belief for me, however, is its long-term potential.
Aging populations around the world will increase the demand for surgical procedures. Meanwhile, Intuitive has continued to launch innovative new products to expand the types of procedures that can be performed with surgical robots. Intuitive’s market opportunity is great, as only a small percentage of procedures can currently be done with robotic assistance. My opinion is that Intuitive Surgical is almost a blow to win in the long run.