Millennials have one of the greatest advantages in the world of investing: time.
With decades to go in the workforce, millennial investors should seek to take calculated risks to improve upon their rewards potential.
Now, that doesn’t mean speculating on potentially worthless assets like Bitcoin, Litecoin, or any other sexy cryptocurrency of the day, nor does it mean chasing momentum stocks blindly without putting in your own due diligence beforehand. It also doesn’t mean investors should play it safe with cash and bonds.
Long-term focused millennials shouldn’t be afraid to take chances on the early-stage growth companies with stories and theses that they believe in, even if that means betting on a stock at fresh all-time highs and a nosebleed-level valuation.
As long as the future growth prospects justify the high price of admission into a name, the stock should be bought and treated as undervalued. As the great Warren Buffett once said, all investing is value investing, in the way that you seek to pay less to get more.
Whether we’re talking about Docebo (TSX:DCBO), a white-hot AI-leveraging pandemic beneficiary with a price-to-sales (P/S) multiple in the clouds (sorry for the pun!), or cruise line stock with a bruised stock, you must always take a page out of Warren Buffett’s playbook by weighing what you’ll pay for what you’ll get.
Don’t shy away from high-growth investing
When it comes to growthier firms, you must look into the crystal ball to determine your expectations for growth (it helps to look at the total addressable market (TAM)) and the multi-year trajectory of operating margins.
While harder to evaluate, one must always attempt to value a high-growth stock, no matter how clouded the future seems. That way, you’ll be better able to tell if a stock like Shopify, is a bargain at 20 times revenues when most others would shun the stock for having a seemingly absurd and unwarranted price tag.
Each stock is tough to value at this juncture, but if you have an investment thesis that warrants a hefty premium higher than where each name is currently trading, you should seek to get some skin in the game.
Docebo is a Learning Management System (LMS) play that’s exploded during the pandemic. With the pandemic’s end likely in 2021, I don’t think the acceleration to Docebo’s business is about to end.
The company has made massive wins this year, and it’ll probably continue doing so, as big-league clients spread the word of the value that an AI-leveraging LMS platform can provide to the many firms that won’t be making an abrupt return to the office once COVID is conquered.
At nearly 30 times revenues, Docebo stock is very expensive, even for a white-hot Software-as-a-Service (SaaS) company. That said, I think it’ll be tough to stop the rapid grower in its tracks as it looks to take control of its niche market.
Ballard Power Systems
Millennials are big into environmental, social, and governance responsible companies. Ballard, a developer and manufacturer of membrane fuel cells, is among the sexiest of stocks for a young person to own amid the continued transition to greener energy sources, which has continued to be a major theme in this pandemic-plagued year.
With Ballard stock soaring another 8.8% on Tuesday, bringing shares up a whopping 235% over the past year, there’s no question that the valuation is suspect. While I wouldn’t say that we’ve entered a “green bubble” or a bubble in clean energy plays, there’s a bit of froth in some of the names, most notably Telsa, a name that’s been speculator’s choice for quite some time.
At the time of writing, Ballard is one of the priciest stocks out there at 47 times sales (that’s sales, not earnings!). While the stock is frothy, I do think the name could be in for an equally profound magnitude of multiple compression as we’re propelled further into the new era of hydrogen-powered transportation.
For most investors, the stock is far too risky to buy. But if you’re a millennial with disposable income, I’d look to take a chance with the name.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify.