Ecapital markets are primarily driven by two feelings – greed and fear. Investors who focus on short-term gains have been known to chase over-publicized, mediocre stocks at irrational valuation levels and ditch less high-profile, quality stocks. However, this strategy comes with great volatility and is not suitable for retail investors. Invest in fundamentally sound stocks with a safety margin remains the best way for investors to obtain long-term returns.
Building wealth in the stock market isn’t as hard as it sounds – $ 1,000 is more than enough to get you started. As long as you don’t need that money to pay bills or for other contingencies, the following three businesses may prove to be wise choices in the long run.
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Leading company in sales-side advertising technology Magnite (NASDAQ: MGNI) has lost nearly 44% of its market capitalization since February 2021. The company helps web publishers and content producers sell their ad spaces to interested advertisers. Investors, however, remain concerned about the company’s future prospects in the face of Appleto allow users to block Identifier for Advertisers (IDFA) at the app level and Alphabetplans to stop tracking cookies on its Chrome browser by 2023. This is understandable since ad technology companies have long been using third-party browser cookies to track user surfing behavior in order to shape advertising campaigns.
However, the intensity of Magnite’s massive sale appears to be overstated. Currently, cookies are only used for 20% of data-driven advertising. Instead, Unified Id 2.0 – an email identity solution supported by Magnite – becomes an alternative to third-party cookies.
Magnite is also expected to benefit significantly from the structural trend in linear TV spending to shift to ad-supported connected TV (CTV). The recently completed acquisition of sales side advertising platform and major CTV player SpotX have made Magnite the largest independent publisher-side advertising technology company, supporting major cable networks and streaming platforms around the world. Emarketer estimates that CTV’s advertising spend in the United States will grow 48.6% year-on-year to $ 13.4 billion in 2021 and hit $ 24.76 billion in 2025. Magnite is an attractive bet on strength of the overall CTV market, without the risks associated with success or failure from any streaming service. Additionally, CTV advertising does not rely on cookies and provides personalized recommendations to users based on personalized logins.
With a market cap of $ 4.2 billion and 12-month revenue (TTM) of $ 246 million, Magnite is still just a small player in the CTV space. However, at a TTM multiple of the sale price (P / S) of 17.1 times, Magnite is reasonably priced, especially for a tech stock. Magnite’s recent foray into CTV’s interactive advertising space in partnership with The trade office and Innovid further enhances the attractiveness of this title as a long-term solid game in 2021.
2. Corporate product partners
Intermediate player in oil and gas Enterprise Product Partners (NYSE: EPD) is well positioned to take advantage of a recovering economy, especially since we may now be in a potential commodities supercycle. While global energy demand is expected to return to pre-pandemic levels by the end of 2022, investment in oil and gas exploration has remained fairly low since 2014. While oil and gas producers increase their supply, we can expect higher fee income for master limited partnership (MLP) Business Product Partners. The company currently operates over 50,000 miles of petroleum, petrochemicals, natural gas and natural gas liquids (NGLs) pipelines, 14 billion cubic feet of natural gas storage capacity and 21 NGL processing plants.
Precedence Research has estimated that the global petrochemical market is expected to grow at a compound annual growth rate (CAGR) of 5.1%, from $ 453 billion in 2020 to $ 729 billion in 2030. This bodes well for Enterprise Products Partners, since NGL is the raw material used for manufacturing. petrochemical. NGL accounted for half of the company’s TTM gross margin of $ 8.4 billion.
Enterprise Products Partners is also a favorite of income investors because of its high 7.6% yield. These payments are well supported by the company’s strong balance sheet and strong cash flow. Fitch Ratings has confirmed the BBB + rating for the company. The company’s debt-to-EBITDA ratio (earnings before interest, taxes, depreciation and amortization) was 3.3 times for the 12 months ending March 31, 2021, well below the target of 3.5 times. Enterprise Product Partners annualized distribution coverage (distributable cash flow divided by the total amount of payments) in the first quarter (ended March 31, 2021) was 1.8 times, and 1.6 times in 2020, which was undoubtedly a very difficult time for the oil and gas industry. The company has also steadily increased its distributions over the past 22 years.
Enterprise Products Partners is currently trading at an enterprise value to EBITDA multiple of 11.32 times, which is slightly above the oil and gas industry median multiple of 10.12 times. While there are several advantages to investing in Enterprise Products Partners, retail investors should be aware of some of the tax concerns posed by its MLP structure, especially for retirement accounts. If you are up to these challenges, the company could prove to be a solid addition to your investment portfolio.
A third smart stock to buy with $ 1,000 is Vizio (NYSE: VZIO), which is essentially a stable and mature device company (selling smart TVs, soundbars and accessories), but is rapidly increasing its exposure as a CTV advertising company.
In 2020, Vizio accounted for 13% of the US smart TV market. Taking advantage of this large installed base, the company introduced Platform +, which includes a smart TV operating system called SmartCast and a data analytics service called Inscape. This digital platform allows users to stream content from a range of publishers.
As users shift more and more from linear TV to OTT, the $ 70 billion linear TV advertising market will also begin to shift to streaming platforms. Building on this age-old tailwind, Vizio is targeting huge monetization opportunities in areas such as ad-supported video on demand (AVOD), home screen advertising and partner marketing. The company aims for more interactivity in advertising solutions and better monetization of subscription services offered on its SmartCast platform. Vizio’s strategic partnership with Verizon Communications is a step towards enabling new cross-platform and CTV advertising solutions, with the help of smart TV data from Inscape.
All of these strategic moves translate into solid financial figures. In the first quarter (ending March 31, 2021), the company’s net revenue increased 52% year-on-year to $ 506 million, while gross profits jumped 82% year-on-year for reach $ 87 million. SmartCast active accounts grew 57% year-on-year to 13.4 million, while total hours spent on Vizio increased 42% year-on-year to 7 billion.
However, Vizio faces stiff competition in the device market from peers such as Samsung and LG screen. This could be a challenge given that devices currently account for almost 90% of the company’s total revenue. Still, the stock remains an attractive choice for its high-growth advertising business, especially when trading at just 1.85 times TTM sales. With this backdrop, it might be a good time to stock up on this cheap streaming game.
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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Apple, Magnite, Inc and The Trade Desk. The Motley Fool recommends Enterprise Products Partners and Verizon Communications and recommends the following options: March 2023 long calls at $ 120 on Apple and March 2023 short calls at $ 130 on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.