Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
It seems we are entering a period of severe austerity. Just this week, the UK officially announced a recession. Due to the government’s extreme reaction to COVID-19, it is the worst recession in recorded history. As the domino-effect of other governments’ actions fall into place, it’s time to reassess and pick cheap long term stocks that show resilience for the long haul.
Best Long Term Stocks
To ensure you safeguard your wealth in this harsh decade, you should try to answer these key questions:
- Which companies have prospered in the middle of the social and economic upheaval?
- What are the factors that made them thrive in a shrinking economy?
- Are these factors rendered obsolete as we leave the pandemic behind and enter recovery?
Square, AppFolio, and Etsy fit the bill quite well, so keep reading to find out why.
Square already appeared on our radar for recommended stocks. It bears emphasizing that people’s relationship with money will irreversibly change.
Cash in the form of paper and coins is going extinct, supplanted by electronic payments. The COVID-19 pandemic serves as the focal point for that transition.
Across the board, third-party payment processors report a significant increase in revenue. Square’s Cash App follows the arc of popularity akin to Robinhood, gaining an impressive 6 million new users.
This translated to its revenue boost by 140%, resulting in $264 million as gross profit. Bitcoin has its own niche and upward trajectory with occasional minor fluctuations.
As a result, Square’s profits soared, reflecting a 600% increase in Bitcoin sales. However, although Square’s Q2 2020 managed $875 million in Bitcoin sales, only $17 million of that translated to gross profits. The more important news about Square is its shift from small to large businesses, which account for 52% of its GPV (Gross Payment Volume).
Cloud-based SaaS ventures are hit and miss, as ScaleFactor showed us. Many offer services of convenience, like automating accounting and administrative processes. As the economy shrinks, this becomes a luxury not many small businesses can afford.
AppFolio has bulwarked itself against such a scenario. Although it still charges a subscription fee, most of its clients are legal firms and property managers whose time is a treasured commodity. Moreover, 64% of AppFolio’s revenue comes from additional services, including marketing, tenant screening, and payments.
The new social distancing norms have made AppFolio’s services even more useful for its clients. Without needing to physically interact with the tenants, AppFolio takes care of rent collection, maintenance requests, lease renewal, and tenant communication all on one platform. Consequently, AppFolio’s enjoys:
- Steady growth of 27% year-over-year for Q2, within an already growing segment of 32%.
- 9% client rise in the property management sector, and 6% client rise in the legal sector.
- Regular additions of new features: virtual property tour, online rent renewal, e-signatures, streamlines metrics, etc.
COVID-19 has already forced the government to extend eviction moratoriums. In the middle of such a mess, AppFolio still thrives, which makes it an excellent stock to invest going forward as COVID-19 becomes nothing but a distant memory, while new social habits remain with us.
A marketplace that already had a business model impervious to disruption, Etsy is disaster-proof as long as there are people who want to buy things that don’t come out of mass assembly lines. Etsy has no warehouse, no physical store, and no supply chain. It “merely” connects artisans working from their home to potential buyers.
The pandemic didn’t even put a dent on Etsy’s business model. Instead, it drove it to further profit heights as 110,000 Etsy sellers answered the public safety call by making face masks.
This alone garnered $346 million in sales. Aside from face masks, it drove traffic for homewares, craft supplies, home furnishings, and personal beauty items, altogether resulting in between 128% and 187% sales increase.
For Q2 2020, Etsy’s user count increased by 41% for buyers and 35% for sellers. It also increased its GMS (gross merchandise sales) by 147%. Including a 51% increase in repeat buyers, all of this data tells us that Etsy is not only resistant to wide-scale economic disruptions, but it will retain it and grow further still.
People tend to stay on such platforms, and Etsy is continually improving it. AI-boosted searches and VR/AR integration are only the latest improvements to better service buyers and sellers.
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