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Here are the best stocks to buy in industries with significant tailwinds and innovation. We used a top-down approach to choose the 10 best stocks to buy right now.
Essentially, we asked ourselves: which sectors are poised to outperform the broader market? Which company in that industry is best positioned?
The following is what we came up with.
Best Stocks to Buy: Overview
Here are 10 best stocks to buy:
- Block (SQ)
- CrowdStrike (CRWD)
- Nvidia (NVDA)
- Disney (DIS)
- Palantir (PLTR)
- Shopify (SHOP)
- Moderna (MRNA)
- Okta (OKTA)
- Advanced Micro Devices (AMD)
- Big Tech
Next, we’ll analyze each of these companies in greater detail.
Best Stocks to Buy: Analysis
#1. Block (SQ)
- 1-Year Trailing Performance: -50%
- Market Cap: $70 billion
- Percent Off All-Time High: -56%
- Sector: Financial Technology
Block (formerly Square) is taking on the world’s most established financial institutions by trying to close the payments loop.
Block provides point-of-sale hardware and software for merchants who can receive payments from consumers via the Cash App — a fast-growing app where users can also buy stocks, bitcoin and send money to friends, family, or strangers.
We believe Block is best positioned to capitalize on the mobile banking opportunity given its forward-thinking leadership, growing network effects, and industry-leading rate of innovation.
Other fintech companies, like PayPal (PYPL), or companies looking to expand their financial ecosystem, like Amazon, are following Block’s lead. That is a signal we like to see.
The bear case for Block is potential regulation. Thoughtful regulation is necessary for the company to become actualized, but it’s been able to grow without regulatory interference for a while now.
It’s unclear how long this luxury will be afforded, especially given the power and influence of traditional financial institutions.
Increased oversight could slow down Block’s growth and significantly impact how investors value the stock.
#2. CrowdStrike (CRWD)
- 1-Year Trailing Performance: +10%
- Market Cap: $54 billion
- Percent Off All-Time High: -19%
- Sector: Cybersecurity
We believe CrowdStrike is the most capable player in the cloud-native cybersecurity space — a subsector we expect to dramatically outperform the broader market in the coming decade.
CrowdStrike uses AI to deliver cloud-based cyber protection to corporations and governments. It offers various services, such as professional responses to individual breaches, but the company’s “Falcon” platform is its core offering, accounting for +90% of annual recurring revenue (ARR).
Falcon is delivered via the cloud, and customers can add additional modules as they grow and see fit.
The ARR model, combined with cross- and upsell opportunities, results in a lethal business model that differentiates CrowdStrike from the pack.
Not to mention the recession-resistant nature of cybersecurity — customers can’t afford to cut cybersecurity spending. It is critical infrastructure in an increasingly digital world.
CrowdStrike’s subscription customer base has grown 65% YoY to nearly 16,325 customers. It has 65 of the Fortune 100, 254 of the Fortune 500, and 15 of the top 20 banks.
Its ARR grew 65% YoY to $1.73 billion in Q4 and recorded a dollar-based retention rate of 124%. This means its existing customer base is not only coming back but spending more when they do.
The company is converting on its cross-selling: 57% of customers have 5 or more modules, and 34% have 6 or more.
We think the potential of this market and CrowdStrike’s first-mover advantage justifies the premium you’ll pay to buy it.
#3. Nvidia (NVDA)
- 1-Year Trailing Performance: +38%
- Market Cap: $533 billion
- Percent Off All-Time High: -35%
- Sector: Technology
Nvidia makes the next wave of technology possible — it creates graphics processing units (GPUs), system-on-chip units (SoCs), and central processing units (CPUs) that power artificial intelligence, which enables technologies like autonomous driving, robotics, cloud, and edge computing, and gaming.
Today, most companies are “AI-enabled” in some way; using Microsoft Excel checks that box, but commercial AI capabilities cannot scale and improve without GPUs. They perform rapid mathematical computations that make high-performance computing (HPC) possible.
CPUs are less efficient than GPUs at executing the processes required for many AI applications. Nvidia believes we are entering a “Post Moore’s Law World” where CPU power has reached its limits for today’s apps, leaving us to rely on GPUs to continue our rate of innovation.
AI applications can only go as far as Nvidia allows them. We can hypothesize about a sci-fi world where AI evolves from Narrow to General (and maybe even Super), but it won’t be possible without companies like Nvidia.
We have the creative capacity to know where this technology is headed, but we do not have the computational power to make it a reality … yet.
Nvidia stock is a call option on the future of artificial intelligence and its endless applications.
Your favorite tech company might have the watershed “AI breakthrough,” but it needed Nvidia to make the breakthrough possible. This is why we believe Nvidia is one of the best tech stocks to buy.
#4. Disney (DIS)
- 1-Year Trailing Performance: -30%
- Market Cap: $237 billion
- Percent Off All-Time High: -34%
- Sector: Consumer Services
The Disney+ and Netflix (NFLX) flippening is enough of an opportunity to strongly consider buying Disney stock.
Disney+ reached 100 million subscribers just 16 months after its launch in 2019 and is now up to 116 million with no signs of slowing down. For comparison, Netflix has 209 million subs, and its rate of new subscribers is decreasing.
Disney+ has several advantages over Netflix that cannot be easily replicated. For example, Disney has a monopoly on the world’s most beloved library of intellectual property (IP).
While Netflix has accelerated its original content production and has created multiple hits such as House of Cards, Orange is the New Black, and Ozark, its IP lacks the potency that separates Disney from every other entertainment company.
Disney has created a reinforcing cycle of adolescent indoctrination into its world of characters and stories. It targets the youth and then monetizes their nostalgia for the rest of their life.
This cycle began in 1923, and we expect it to continue indefinitely.
Disney’s off-platform monetization opportunities only strengthen the cycle. In addition to serving as a continuous in-home advertisement for Disney characters and stories, the company can create new theme park rides, cruise ships, experiences, attractions, and merchandise for successful hits on Disney+.
In conclusion, the fact that Netflix has created so much quality content suggests that other streaming stocks can too.
But only Disney can make another Avengers movie or recycle Lion King into a $1.65 billion box office film.
We believe that Disney’s IP moat gives it a better chance than Netflix of being around 100 years from now.
#5. Palantir (PLTR)
- 1-Year Trailing Performance: -43%
- Market Cap: $25 billion
- Percent Off All-Time High: -71%
- Sector: Technology
Palantir is a software company that empowers organizations to integrate their data, decisions, and operations. In its early days, it exclusively built software for the U.S. government, military, and intelligence community to make the West the “strongest in the world for global peace and prosperity.”
Palantir has since expanded into the commercial sector, putting its AI and machine learning algorithms to use in areas like predictive analysis and supply chain management.
The company estimates its total addressable market (TAM) to be $119 billion across the commercial and government sectors.
Palantir’s penetration rate is currently below 1% of its TAM. These lofty metrics make PLTR polarizing in the eyes of investors — they’re either very bullish or very bearish. We side with the former.
We believe that Palantir has unmatched potential in the private markets thanks to its Foundry and Apollo platforms.
Essentially, Foundry and Apollo make organizations smarter by operationalizing machine learning. In addition to actionable insights, these platforms determine potential outcomes and side effects of a certain decision before it is executed.
This is what CEO Alex Karp refers to when he says, “I know this looks like something no one needs, but they’ll need it in ten years.”
COO Shyam Sankar has said, “Most software makes users more similar to their competitors. Palantir makes you more differentiated.”
These new offerings are experiencing massive growth, and we only expect these trends to continue as digitization accelerates.
Palantir grew its commercial revenue 47% year-over-year to $433 million. Its Q3 US commercial revenue growth increased to 132% year-over-year.
The company’s government revenue, driven by the Gotham platform, grew 26% year-over-year. Palantir also added 34 net new customers in Q4 2021, signing 27 deals worth $5 or more and 19 deals worth $10 million or more.
Palantir’s growth in the public sector is obviously a good sign, but we believe a flippening has to occur between its public and private revenues for the company to deliver the most shareholder value.
Palantir’s potential upside is tremendous.
#6. Shopify (SHOP)
- 1-Year Trailing Performance: -49%
- Market Cap: $72 billion
- Percent Off All-Time High: -65%
- Sector: Technology
Shopify’s platform facilitates the shift from offline to online retail, a transformation that is still in its infancy.
Online retail accounted for just 13% of the total retail sales in the second quarter of 2021. That is hard to believe, but it suggests that Shopify has plenty of opportunities ahead of it.
Also, Shopify supports decentralization trends that have become increasingly popular in the digital world.
Thanks to services like Shopify, anyone can bring their idea to life. Open a Shopify store online, buy some Facebook ads, and instantly compete with name brands like Nike or Salesforce (CRM).
In addition to business intelligence software and insights, merchants can tap into a world-class logistics network for a few bucks a month.
Shopify brings the entrepreneurial spirit to the internet in a frictionless way, a credit to the company’s strong developer community.
If Amazon is “customer-obsessed,” then Shopify is “merchant-obsessed.” Each approach plays an important role in commerce, but the latter evens the playing field for entrepreneurs competing in the digital economy.
Shopify is showing the market that it’s a fintech company, too. It announced that Shop Pay will be available to all merchants selling in the U.S. on Facebook and Google, even if they don’t use Shopify’s online store.
This decision positions Shop Pay to become the preferred checkout for all merchants regardless of their platform.
In conclusion, Shopify controls 11% of the total E-commerce market share, and its revenue continues to skyrocket year after year, up 57% in the recent quarterly report.
The company is just shy of a $100 billion market cap, and we think it’s just getting started.
#7. Moderna (MRNA)
- 1-Year Trailing Performance: +2%
- Market Cap: $66 billion
- Percent Off All-Time High: -65%
- Sector: Biotechnology
In addition to fintechand cybersecurity, the potential of the biotech space is too exciting to ignore.
Some incredible things are happening in the industry with gene editing and CRISPR technology, but Moderna’s bio platform might take the cake.
Most biotechs develop a single drug for a specific therapeutic use case and then pawn it off to Big Pharma.
They do the technical heavy-lifting, and Big Pharma handles the distribution and marketing. The biotech gets a revenue share of sales, and you can imagine who receives a larger piece of that pie.
Moderna has a different approach; instead of developing individual drugs and starting from scratch each time, it built a “bioplatorm,” or a repeatable drug creation and development process.
Moderna’s bio platform gives it leverage in an industry where speed and costs matter.
The only variable that changes in Moderna’s process is the mRNA sequence itself — everything up to coding that sequence is automated. This automated pipeline is the company’s moat.
The challenges of ensuring successful mRNA delivery at scale are technical and capital-intensive.
Moderna played the long game and invested billions upfront. Its success in 2021 is a byproduct of its patience and execution over the previous decade.
Additionally, the COVID-19 pandemic fundamentally changed Moderna’s business model. It is no longer dependent on Big Pharma for product roll-outs and can now benefit from direct sales.
Now, Moderna can develop the tech and sell the tech. This differentiates it from traditional Big Pharma and fast-moving biotechs.
This puts Moderna in a category of its own, which is one reason why it’s been the best performing stock in 2021.
All of the companies in this article are “accelerating” some trend or innovation, but none have the potential to explicitly impact humanity like Moderna.
Block will improve how you interact with money. Nvidia will increase your computing power. Disney will make your entertainment more enjoyable. But Moderna has the potential to set humanity on a new course.
Innovation is not static — it happens directionally. Moderna’s bio platform is currently being used to heal humans, but it will be used to upgrade humans one day.
The implications of this are exponentially more profound than a faster digital wallet and better internet connection.
#8. Okta (OKTA)
- 1-Year Trailing Performance: -46%
- Market Cap: $23 billion
- Percent Off All-Time High: -48%
- Sector: Cybersecurity
Okta is an identity and access management (IAM) company that sells subscription software to help organizations manage and secure user authentication into applications.
Essentially, Okta ensures that users are who they say they are when they’re using a given application.
Securing online identities is crucial in an increasingly online world. So, how does Okta do it?
Okta is a leader in Zero Trust Security. This approach to cybersecurity ensures “the right people have the right level of access, to the right resources, in the right context, and that access is assessed continuously.”
Zero Trust means that if nefarious actors breach the walls of the castle, they can’t really do anything once they’re inside.
IAM is the foundation for an enterprise’s Zero Trust security architecture. The whole thing is a house of cards without establishing effective IAM protections. And no one does it better than Okta.
We believe there is a massive future for identity as the ‘digital you’ continues to represent a larger percentage of the ‘physical you.’ Okta’s customers appear to agree.
The company grew its quarterly revenue 63% year-over-year to $383 million, primarily subscription revenue.
Okta has $2.69 billion in remaining performance obligations over the next 12 months, up 60% YoY.
Okta recorded a 124% dollar-based net retention rate over the last year — another key metric for SaaS companies that we discussed in the CrowdStrike section.
Additionally, Okta completed a $6.5 billion acquisition of one of its top competitors, Auth0. This expands Okta’s TAM into Customer Identity, further diversifying revenue streams and improving pricing power as a result.
Okta is synchronizing the digital and ‘real’ world with integrity. The demand for this technology is rapidly increasing, and there are few market participants to fill it. That’s a good combination for Okta.
#9. Advanced Micro Devices (AMD)
- 1-Year Trailing Performance: +14%
- Market Cap: $150 billion
- Percent Off All-Time High: -40%
- Sector: Technology
AMD is a semiconductor company that develops computer processors. It makes CPUs and GPUs for high-performance computing, much like Nvidia.
AMD has three business segments: Data Center, PC, and Gaming. It values this opportunity at $79 billion.
AMD’s primary source of revenue is CPU design for consumer and commercial computing. Intel has controlled this market for decades, but AMD is gaining market share — and fast.
AMD’s Ryzen series of processors launched in 2017, and it’s already soaked up 44% of the CPU market.
We expect this flippening to continue, given AMD’s superior tech.
AMD is also making strides in the Data Center market, recently acquiring Xilinx for $35 billion to expand its product portfolio and add FPGAs (field-programmable gate arrays) to the mix.
FPGAs can be programmed by customers after it has been manufactured, enabling customization for specific computing tasks.
AMD expects this addition to increase its TAM 39% to $110 billion.
Evidently, AMD is moving at lightning speeds to become the industry’s leading high-performance computing company.
We believe that owning Nvidia and AMD covers your bases in the semiconductor space — arguably the economy’s most important sector. AMD is truly one of the best stocks to buy.
#10. Big Tech Stocks (FAAMG)
Facebook (now Meta) (FB), Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Google (GOOG) are trillion-dollar companies that are still growing like the start-ups they once were.
They’re just profitable now.
We’re entering uncharted territory from a market cap perspective. Apple became the first $1T company in 2020, and the rest of FAAMG soon followed, but it’s unclear exactly where the ceiling is for these companies.
Each FAAMG stock is up several thousand percent since they went public, so the majority of their equity returns are behind them.
However, we believe each of these stocks can serve as ballast for a portfolio without sacrificing growth.
From an expected value approach to investing, it’s hard to find better value when considering the probability of a 2x-5x from current levels combined with the high probability of the company being around 50 years from now.
These are the most capable technology companies on the market.
They are quality institutions with access to the best talent and resources around the globe. It’s not unreasonable to think each of them still has significant upside from here.
Besides, who else is going to build the metaverse?
Bottom Line: Best Stocks to Buy
Every stock mentioned is a “high-growth tech stock” by traditional definitions. But isn’t everything a technology company nowadays?
These aren’t the technology companies of 1999 that were slapping .com on the end of their names to see a quick 15% pop the next day.
The majority of these will fall faster during downturns, but the volatility works both ways. We expect each of these to appreciate significantly with sufficiently long time horizons.
These companies are creating the future and deserve some consideration for your portfolio.
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This article is for informational purposes only. It is not intended to be investment advice. Read more about our editorial integrity and public equities research methodology to better understand how we value individual equities and investment opportunities. This article was updated on April 17th, 2022 to reflect changes in each stock’s performance and market capitalization.
