3 Unstoppable Stocks That Can Leave Dogecoin in the Dust

Dogecoin (CRYPTO: DOGE) was all the news in 2021, and for good reason. By early May 2021, this meme-inspired cryptocurrency had gained over 12,000% since early 2021. And even now, with Dogecoin trading more than 40% below its all-time high of $ 0.74, it's still up 6,880% so far (at the time of this writing).

But Dogecoin is extremely volatile and is not backed by any asset. The rally was fueled mainly by the Reddit hype and celebrity support. Dogecoin has no significant competitive advantage over other cryptocurrencies - be it transaction fees or payment speeds. Retail investors should stay away from such speculative investments in order to protect their portfolios from extreme ups and downs.

Instead, I have three companies in mind that have great long-term tailwinds and can grow dramatically in the coming months - all without significantly increasing your portfolio risk. Let's see why PayPal stocks (NASDAQ: PYPL), lemonade (NYSE: LMND), and Novocure (NASDAQ: NVCR) be the right thing.

Image source: Getty Images.

1. PayPal

As a pioneer in digital payments, PayPal has benefited dramatically from the accelerated adoption of e-commerce and digital transactions, a trend that is likely to continue after the pandemic ends.

As of the end of the first quarter (ending March 31), PayPal had 392 million active customer accounts and 31 million merchant accounts on its platform. As more users join PayPal, the payment intermediary becomes even more inevitable for businesses, which then attracts even more customers. This network effect is difficult to disrupt and a solid barrier to entry for competition.

To attract even more customers, PayPal has focused on introducing a number of innovative products and services, such as: B. Cashless payment features for in-store purchases, including payment cards, QR codes, and the tap-and-pay and buy now, pay later feature for its PayPal and Venmo wallets. For customers who use Buy Now, Pay Later, PayPal saw a 15% increase in total payment volume and a 16% decrease in cost per transaction (as direct debit payments are cheaper).

In the first quarter, PayPal revenue, adjusted earnings per share (EPS), and free cash flow increased 31%, 84%, and 27%, respectively, year over year. The company expects its total active accounts to grow 52 million to 55 million in fiscal 2021 and TPV to increase 30% year over year. PayPal now expects fiscal 2021 revenue and fiscal 2021 adjusted earnings per share to be 20% and 21% higher than last year, respectively.

PayPal trades at 13.6 times its trailing 12-month sales (TTM) and is not the cheapest stock on the market. In a world that is rapidly becoming cashless, this digital payment giant can be an attractive investment for private investors even at this high level.

2. Lemonade

Insurance technology company Lemonade is stock at the time of this writing, over 47% below its all-time high of $ 190 in January. Investors are disappointed by the company's claims ratio (percentage of claims incurred to premiums collected) of 121% in the first quarter (end of March 31), which is well above the 71% for the 2020 financial year. The property damage caused by winter storm Uri in Texas meant that the company processed "a year’s claims in just a few days." Such natural disasters are mostly unpredictable, although a certain amount of losses can be covered by reinsurance.

Despite these challenges, Lemonade has shown progress where it really matters. In the first quarter, the company's total customer count increased 50% year over year to 1.1 million, the in-force premium (total annualized premium) increased 89% to $ 252 million, and the premium per customer increased 25% to $ 229. These numbers underscore the strength of Lemonade's technology-enabled disruptive customer service model, which enables users to purchase policies and process claims in minutes. The company's foray into pet insurance, life insurance, and now auto insurance has also opened several cross-selling opportunities.

Lemonade now expects fiscal 2021 sales to grow 24% to 28% year over year, up from the previous forecast of 21% to 24%. The company also maintained its previous EBITDA loss forecast of $ 163 million to $ 173 million, despite higher losses in the first quarter. After all, the company is sitting on an unlimited pile of $ 1.03 billion in cash, which is enough to cover the majority of its losses for at least the next few years.

Lemonade trades at a high price-to-sale (P / S) multiple of around 59. However, because the company collects over 100 times more data from its customers than traditional insurers, Lemonade can leverage its artificial intelligence (AI) capabilities to develop a much stronger customer experience and risk management system. The company uses AI-based bots and data functions for customer acquisition and claims handling, which helps it lower its labor costs. This technology-driven approach has enabled the company to offer cheaper policies for similar coverage. Therefore, younger customers (with higher lifetime value) are increasingly choosing Lemonade over traditional insurers. Against this background, the company offers long-term investors an attractive risk-reward ratio, even at higher valuation levels.

3. Novocure

Medical technology company Novocure has developed a unique technology to fight aggressive cancers. The company's flagship product is a handheld and hand-held device called the Optune that works by generating tumor treatment fields (TTFs). These are electric fields that help control the division of cancer cells without affecting healthy cells.

The US Food and Drug Administration (FDA) has already approved the use of Optune for the treatment of mesothelioma (a rare cancer caused by exposure to asbestos) and two types of glioblastoma multiforme (GBM), an aggressive brain tumor. In the first quarter, the company's active patient count increased 12% year over year to 3,454. While GBM is the company's main sales driver, there is still plenty of room for growth considering the penetration of this indication in the US; Europe, Middle East and Africa (EMEA); and Japan is only 37%, 34% and 31%, respectively.

Novocure's TTF treatment is also being evaluated in other aggressive cancers, such as non-small cell lung cancer (NSCLC), pancreatic cancer, ovarian cancer, and gastric cancer. Investor hopes in these pipeline programs are high, especially after the FDA allowed the company to reduce regulatory approval for the control arm in the pivotal Lunar Phase 3 study to evaluate the efficacy of TTFs in advanced NSCLC. This decision is based on an interim analysis of the study by an independent data monitoring committee. According to the committee, "it is likely unnecessary and potentially unethical for patients randomized to the control arm to continue to accumulate 534 patients with an 18-month follow-up." While the clinical trial data is blinded to Novocure, it is completely unblinded to the Data Monitoring Committee. Since the Committee believes it is unethical to refuse TTF treatment to patients in the control arm, it seems obvious that Novocure's product shows significant clinical benefit.

In the first quarter, the company's revenue rose 32% year over year to $ 134.7 million, while Adjusted EBITDA rose 40 percent year over year to $ 21 million. The company had $ 864 million in cash on its balance sheet at the end of the first quarter. In contrast to many medical technology companies with innovative products, Novocure is already profitable. In fiscal 2020, the company reported net income of $ 20 million. Against this background, the share can prove to be an attractive investment for private investors despite a P / S multiple of over 40.

This article represents the opinion of the author who may disagree with the "official" referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis - even one of our own - helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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