As they build a robust portfolio, many investors will seek companies with solid long-term growth prospects. With growth as the portfolio’s foundation, they can then sprinkle on a layer of dividends that act as a passive income source. However, I feel that these two attributes are not the only considerations one should have when building an investment portfolio. It’s also important to ensure adequate diversification when it comes to industries, as evidenced by how the pandemic has played out over the last six months.
As the coronavirus swept the world, numerous countries announced lockdowns and border closures. Industries that rely on tourism and travel, such as airlines, transportation, cruise lines, and hotels have been adversely impacted by the crisis and the related closures. However, industries such as digital payments and technology have been less impacted, while select companies that have a strong digital presence and can adapt to these new conditions have not only survived, but even thrived.
Here are three stocks that have remained resilient despite the pandemic, and which offer good diversification with regard to industry exposure.
Domino’s Pizza (NYSE:DPZ), the largest pizza company in the world based on global retail sales, has weathered the pandemic surprisingly well. With a total of more than 17,100 retail stores in more than 90 markets globally, the quick-service restaurant chain was expected to be badly impacted by movement restrictions and lockdowns. However, the company reported year-over-year revenue growth of 13.4% in its latest quarter. Same-store sales growth in U.S. stores surged by 16.1%, while net income jumped by 28.5% year over year to $118.7 million.
Domino’s is well positioned for the surge in demand caused by the pandemic, as more people stayed home and ordered pizza deliveries. The company continued to grow its store network, reporting net store growth of 84 stores in the second quarter, and generated free cash flow of $178.1 million in the first six months of the year.
As recently as mid-August, Domino’s announced that it plans to hire an additional 20,000 employees. Demand has stayed strong and the company also aims to support the local community by creating jobs for those who became unemployed during the pandemic. The global pizza industry was worth $141 billion in 2019, and Domino’s market share stood at 36%, with the rest being shared by other pizza chains and independent stand-alone outlets. There is still room for the company to continue growing, as the total addressable market remains large.
PayPal Holdings (NASDAQ:PYPL) is a market leader in the online payments space. The company offers a suite of payment solutions such as PayPal, Braintree, Venmo, and Xoom on its proprietary payment platform, and offers customers the flexibility of using their accounts to make purchases and receive payments for goods and services. The COVID-19 pandemic has led to a record performance for the company’s second quarter. Net revenue was up 22% year over year to $5.3 billion for the quarter, while net income soared by 86% year over year to $1.5 billion.
PayPal also saw a 21% year-over-year increase in active accounts to 346 million, with 21.3 million new accounts added in just the second quarter alone. Total payment volume surged by 29% year over year and exceeded $200 billion for the first time in the company’s history. President and CEO Dan Schulman remarked that digital payments have become more essential than ever during this crisis, and the pace of adoption has only accelerated in recent months. This trend bodes well for PayPal’s long-term growth prospects and investors can likely look forward to more good news.
Apple (NASDAQ:AAPL) has remained resilient throughout the crisis as more people purchased its MacBooks and iPhones to stay in touch with loved ones. The smartphone company saw its third-quarter revenue jump 10.9% year over year to $59.7 billion, with all five core categories logging sales increases.
The company has continued to grow its wearables and services divisions, with revenue up 16.7% and 14.8% year over year, respectively. The services division now makes up 22% of total revenue, up from 21.3% a year ago, and commands higher a gross profit margin of 67%. Apple continues to release innovative new products to stay ahead of its competition, with the upcoming iPhone 12 and Apple Watch 6 generating a huge amount of anticipation.
With its strong ecosystem of apps and a services division that is generating higher levels of recurring income, Apple looks set to continue enjoying multi-year growth.