The market is as unpredictable as ever these days. Fueled by volatile investor behaviors and historical rallies, there have been very few boring days for investors since the pandemic began. If you're an investor who's worried about another market crash, you're certainly not alone.
With the continued overinflation of many top stocks and the still-raging pandemic, it's a real possibility that the market could crash again. There's simply no way to know for sure. But seasoned investors know that the stock market is cyclical, and the way that you structure your portfolio now can help you to be amply prepared for whatever headwinds or tailwinds the market brings.
Today, we're going to take a look at three rock star stocks to buy if you're concerned about another market crash. And even if you're not worried about the market taking a hit in the near future, the following companies are some of the top growth stocks for long-term investors to buy in 2021.
Let's dive right in.
Cloud computing company Fastly (NYSE:FSLY) has seen its shares grow by roughly 380% over the past year. Fastly's industry has proven particularly recession-resilient since the pandemic hit, and the company has continued to exhibit remarkable balance sheet growth throughout the economic crisis that has followed.
Take Fastly's performance during the third quarter of 2020, for instance. The company's revenue shot up by more than 40% compared to the year-ago period, while its dollar-based net expansion rate swelled to 147%. Fastly reported that its average spend per enterprise customer totaled roughly $753,000 during the third quarter, an increase of about $37,000 from the prior quarter. Fastly also grew its third-quarter gross margin on the basis of generally accepted accounting principles (GAAP) to 58.5%, representing an increase of 3.3% from the same quarter in 2019.
Investors were concerned last fall when the company's largest client, ByteDance, was forced to pull the plug on its subsidiary TikTok after former President Donald Trump signed an executive order to ban the popular social media app. ByteDance eliminated the majority of TikTok's traffic from Fastly's platform, and shares of the company wobbled in kind. However, following multiple federal rulings that deemed the proposed ban unconstitutional and discussions of a partial acquisition of TikTok by a U.S. company that never came to fruition, the ban was never implemented.
The good news is that Fastly's ability to maintain its growth trajectory doesn't start and end with ByteDance, regardless of any new developments that may arise in the new year. And its high gross margin driven by an ever-growing client base indicates that it has plenty of wiggle room to work with as it continues to expand its roster of users. Fastly also has a solid cash position to fall back on that far outweighs its total debt. At the end of the third quarter, the company had roughly $310 million in cash and cash equivalents on its balance sheet, as opposed to about $96 million in total liabilities.
Analysts seem confident in Fastly's future growth prospects. They think that the company can increase its average annual earnings by 30% over the next five years alone. If you're looking for a recession-ready, high-growth tech stock to weather the next market storm, Fastly is a worthy contender for your list.
2. Innovative Industrial Properties
Innovative Industrial Properties (NYSE:IIPR) is a real estate investment trust (REIT) that owns 67 properties across the U.S., which it rents out "to state-licensed medical-use cannabis operators." The REIT also pays a robust quarterly cash dividend that yields approximately 3% based on current share prices.
The cannabis industry has historically been a volatile one, and only a handful of stocks in this sector have weathered the pandemic economy well. Innovative Industrial Properties is one of them. The REIT's focus on the medical-use cannabis industry is part of the reason it has seen far less volatility than other top pot stocks. Legalization of medical-use cannabis is occurring at a much faster rate than for recreational marijuana. At the time of this writing, more than half of U.S. states have already legalized marijuana for medicinal purposes, whereas only 16 states have enacted full marijuana legalization.
A number of states, including Kansas, Kentucky, South Carolina, and Alabama, are considering proposed legislation that would further expand the list of medical marijuana states in 2021, which could also open up new avenues of business for companies like Innovative Industrial Properties. And the possibility that marijuana could be decriminalized at the federal level under the new Biden administration would benefit stocks like Innovative Industrial Properties as well as recreational pot stocks.
The REIT grew its top and bottom lines by triple digits in each of the first three quarters of 2020. It reported revenue growth of 210%, 183%, and 197% during these quarters, while its net income rose 249%, 322%, and 205% from the year-ago quarters. One of the common afflictions among pot stocks is high debt, but Innovative Industrial Properties has no such troubles. The REIT reported zero debt on its balance sheet as of the third quarter (aside from $144 million in unsecured debt) and a combined total of $612 million in cash and short-term investments. Innovative Industrial Properties is one of the rare cash-rich pot stocks, and its ability to deliver superior growth and dividend income to investors makes it a compelling buy in any market environment.
The final stock to consider buying to help crash-proof your portfolio is financial software company Intuit (NASDAQ:INTU). The company's portfolio of products includes popular tax preparation software TurboTax and accounting software QuickBooks. Intuit does pay a dividend, albeit a modest one with a yield of under 1% based on current share prices.
In Intuit's fiscal year 2020 (ended July 31), it boosted its overall revenue 13% on a year-over-year basis. Revenue from Intuit's TurboTax and Quickbooks software products alone shot up 22% compared to fiscal 2019, while its Online Ecosystem and Small Business/Self-Employed group revenues grew 31% and 15%, respectively.
Intuit also started its fiscal 2021 off with a bang. During the first-quarter period ended Oct. 31, the company reported 14% revenue growth. Its Small Business/Self Employed segment revenue was up 13% year over year, while Online Ecosystems revenue spiked 24%.
Intuit's strength lies in its continued ability to maintain a stable trajectory of growth regardless of what the economy's doing. Shares of the stock fell briefly last March, but quickly rebounded and are now up 33% from one year ago. It's not surprising that Intuit's balance sheet largely held steady in its fiscal 2020 in spite of the pandemic's impact, given that the products it offers generally face a consistent level of demand from businesses and individuals alike.
Intuit also has approximately $5 billion in cash and cash equivalents and $2 billion in long-term debt, which means the company has plenty of liquidity to satisfy its dividend obligations and cover all its bases if the market does crash again. Management has said that it expects to report between 8% and 10% revenue growth for the full-year fiscal 2021. It's also worth noting that analysts think that the company can consistently grow its average annual earnings by double digits over the upcoming five-year period.