Lingering uncertainty has plagued the stock market. The U.S. presidential election looms close, coronavirus cases are surging, and Congress still hasn't approved additional aid. However, smart investors are taking advantage of the recent dip and buying up pandemic-proof stocks that have excelled during this turbulent year. Amazon (NASDAQ: AMZN), NVIDIA (NASDAQ: NVDA), and Shopify (NYSE: SHOP) are three stock picks where you could invest $5,000 right now and reap significant benefits over the long term.
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If any one company could be called the star of the year, it would have to be tech giant Amazon. When other companies were worried about a recession and accommodating the need for social distancing among employees, Amazon soared on the back of an accelerated wave of e-commerce growth.
In the second quarter of 2020, the company's net sales jumped by 40% year over year and net income doubled. Although it was already well-situated to take advantage of pandemic-related shifts in shopping habits, Amazon further padded its product lineup. It expanded its grocery delivery capacity by over 160%, added a number of Amazon Prime Video originals to its content library, and rolled out new features for Amazon Web Services that support the general commercial transition to the cloud.
Given all this, Amazon expects third-quarter net sales to grow 24% to 33% year over year. The company enjoys an extremely high valuation, with a trailing price-to-earnings ratio of 123, but Amazon also boasts buckets of market potential. It's already experiencing heavy demand and double-digit growth, and analysts forecast even stronger growth after the pandemic wave is past.
Shares of chipmaker NVIDIA have jumped 131% year to date, and with good reason. Not only has the company been investing heavily in expanding its data center unit, Jon Peddie Research also found that NVIDIA's graphics processing unit (GPU) shipments rose 17.8% sequentially in the second quarter.
The company has grown significantly this year, largely thanks to increased revenue from its data center segment. While business across the board has been positive, NVIDIA's data center business grew an astounding 167% year over year last quarter. Although the company's operating expenses under generally accepted accounting principles (GAAP) increased 67% as it processed the acquisition of networking company Mellanox, second-quarter GAAP net income still increased by 13%, and adjusted net income surged 79%.
NVIDIA has also been in the news for its recently-announced agreement to acquire British-based chip powerhouse ARM Holdings, which stars in its plans to power the world's most powerful artificial intelligence (AI) supercomputer. Stitching together NVIDIA's Mellanox networking hardware and over 14,000 data center GPUs, this new supercomputer could usher in the age of real AI networking. With such strong upside, NVIDIA will likely continue to grow at a strong clip. As a small bonus, the company does pay dividends, albeit with a low yield of 0.12%.
Shopify has been yet another beneficiary of the pandemic tailwind in digital business. Shares of the online storefront platform have more than tripled in value since bottoming out in March. The trend toward e-commerce is going strong, and the company has logged a substantial increase in profit this year, jumping from a 2019 second-quarter GAAP net loss of $28.7 million to a 2020 second-quarter net profit of $36 million.
Shopify enjoys an extremely high valuation, with a market capitalization of $125 billion despite only recently turning a profit. But the company is growing extremely fast, with a roughly 700% increase in total revenue over the past five years. Total revenue rose 97% year over year in the second quarter of 2020.
Furthermore, Shopify has a huge potential market. The global e-commerce market is estimated to exceed $27 trillion by 2027, and as a wildly popular e-commerce platform, Shopify is well-positioned to take advantage of the accelerated demand for digital business creation. In other words, its high potential and proven ability to deliver mean that Shopify could soar to even greater heights in the future.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Christine Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, NVIDIA, and Shopify and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.
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