3 Companies You Need To Look At AGAIN
Finding great companies to invest in can sometimes be as easy as looking at what products and services you use every day, and then digging into the companies to see how they’re growing. But what if you’re using a company’s product or services every day and don’t even realize it?
So, we asked three Motley Fool contributors for stocks that investors may not have noticed that they use every day and that make great investments. Here’s why Twilio (NYSE:TWLO), American Tower (NYSE:AMT), and Amazon.com (NASDAQ:AMZN) made the cut.
The future of communications, behind the scenes
Nicholas Rossolillo (Twilio): The world is going digital, and with it, the way we keep in touch with each other is changing. So is the way we interact with businesses. Working behind the scenes is Twilio, which operates a digital toolbox that helps developers embed communications services into business apps — from voice to email and text to video.
While the vast majority of consumers have never heard of Twilio, there’s a really good chance that most everyone has interacted with a business that uses one of itis tools at some point. The company touts tens of thousands of customers, some notable ones being airbnb, The American Red Cross, and Hulu, just to name a few.
Just because a company is widely used doesn’t make its stock a buy, but Twilio is a different story. The demand for the software suite Twilio operates is in increasingly high demand, and it’s translating into growth at breakneck speed. Revenue was up 86% in the second quarter of 2019, and though adjusted profits are almost nonexistent at this point, much of that is due to Twilio funneling cash back into itself to maximize its upside right now. Profits will be a worry later.
As a result, shares are up nearly 50% in 2019 as of this writing. It’s not too late to jump aboard, though, as all indications are that Twilio has a bright future ahead of it. This widely used communications provider will likely offer up a wild ride since it’s still in high-growth mode, but for the patient investor, this stock could be a big winner over the long term.
Towering above the future
Daniel Miller (American Tower): If you use a smartphone, chances are that you’re indirectly using services provided by American Tower every day and not even aware of it. AMT owns and leases about 170,000 cell towers throughout the United States, Asia, Latin America, Europe, and the Middle East, and major mobile carriers rent space on these towers to install equipment and support their wireless networks with technologies that include telephony, mobile data, broadcast television, and radio, among others.
And while you likely have used services installed on American Tower, perhaps even on a daily basis, the company is far from a household name. You might not realize AMT is a real estate investment trust (REIT), which means the company is legally required to distribute at least 90% of its taxable income to investors in the form of dividends.
Furthermore, what’s even better about owning AMT right now, is that with fears of a potential economic slowdown, or even a possible recession, AMT’s business won’t be disturbed. Regardless of what happens with the economy, consumers will still need their phones operating and pinging data off their mobile carrier’s technology installed on AMT’s network of towers.
Not only is AMT’s business resistant to an economic downturns, it’s also well positioned to thrive as the rollout of 5G technology accelerates, which should increase demand for tower space. AMT enters long-term leases with large wireless carriers and those contracts include rent escalators at an average of 3%, helping to boost the company’s top-line revenue annually. In fact, AMT just posted a strong second quarter as total revenue increased 6.1%, property revenue jumped 5.7%, and net income got a 38.1% boost.
There’s a lot to like about AMT’s current recession-resistant business, future growth story, and dividend, even if you didn’t realize you might be using its services every day.
You don’t have to have a package on your doorstep to use Amazon
Chris Neiger (Amazon): Amazon is best-known for its e-commerce platform, which accounts for nearly 40% of all online sales in the U.S. And while it has more than 100 million Prime members in the U.S., you don’t have to be one of them to interact with this company on a nearly daily basis.
That’s because large companies including Conde Nast, Expedia, Netflix, Kellogg’s, Comcast, Adobe, and many others all use Amazon’s cloud computing offering, called Amazon Web Services (AWS), to host and deploy various services and features for their online users. While Amazon is known for its e-commerce platform, it’s the company’s AWS cloud computing service that many people are interacting with online every day — and it’s also the true moneymaker.
AWS generated $2.1 billion in operating income on $8.4 billion in sales in the most recent quarter, compared to the company’s North American retail operating income of just $1.6 billion from $38.7 billion in sales. AWS’ 25% operating margin is impressive in its own right, but its results are even more important when you consider that the cloud computing market will be worth $278 billion by 2021 and that Amazon already accounts for about half of the infrastructure-as-a-service (IaaS) cloud market.
With Amazon already leading in the cloud market and generating most of its profit from AWS, investors would be wise to take a closer look at this company that they likely interact with almost every day, even if it’s only behind the scenes.