Investing alongside you, fellow Foolish investors, here’s a selection of stocks that some of our contributors have been buying across the past month!
What it does: Datadog provides an observability platform to manage and monitor the flow of data between cloud-based applications.
By Zaven Boyrazian. Datadog (NASDAQ:DDOG) is a software-as-a-service enterprise that enables its customers to monitor their cloud-based applications. The system can be connected to over 600 industry-standard technologies like Salesforce and AWS, enabling customers to control and observe the flow of data throughout their entire pipeline from a single platform.
Apart from identifying bottlenecks to improve efficiency, it serves as a robust cyber-security and regulatory compliance tool that’s used by over 25,500 companies worldwide. And that includes the London Stock Exchange itself.
The application performance monitoring sector is not short on competition. A recent report by Gartner revealed 19 businesses operating in this space. And while Datadog is considered a leader, fierce competition from the likes of Dynatrace and New Relic could impede future growth.
Nevertheless, given the group’s impressive track record and cash-generating business model, I’m confident that Datadog could be a multi-bagger for my portfolio in the long run.
Zaven Boyrazian owns shares in Datadog.
Primary Health Properties
What it does: Primary Health Properties leases healthcare buildings in the UK and Ireland. The majority of its rent comes from the NHS.
Rising interest rates have been weighing on the market value of the company’s assets, which is why the stock is down 19% over the last 12 months.
Exactly when this will recover, I don’t know – probably when the Bank of England starts to lower interest rates. But I’m not bothered by this, since my investment in the business isn’t based on the value of its assets.
Instead, I’m interested in the cash flows the company generates. And management announced an extra £3.1m in income during the third quarter, with more to come by 2024.
With its rent roll funded mostly by the NHS, there’s a risk that a change in government could bring uncertainty for the business. I think the 7% dividend yield justifies the risk of buying the stock here, though.
Stephen Wright owns shares in Primary Health Properties.
What it does: Revolve Group is an online fashion retailer that specialises in selling high-end clothing and accessories.
They peaked in November 2021 at $86.01 apiece, but have since fallen by 85.4% to $12.53 at the time of writing.
This is because its revenue and profit have declined slightly due to tough global economic conditions. This poses a short-term risk to carrying its shares.
However, I’m a long-term investor.
Between 2017 and 2022, its revenue grew from $400m to $1.1bn. As the economy stabilises, I believe it will return to this level of growth.
Furthermore, I believe its use of artificial intelligence (AI) will continue to give it an edge over competitors.
It collects data analytics on its customers purchasing decisions for other brands listed on its site. This allows it to emulate successful brands based on that analysis.
With a current price-to-sales (P/S) ratio of 0.9, its stock are too cheap for me to ignore, and I’ve recently bought more.
Muhammad Cheema owns shares in Revolve Group.
What it does: Rightmove operates the UK’s largest property search portal. Through its website and app, users can search for properties to buy or rent.
By Edward Sheldon, CFA. Rightmove (LSE: RMV) shares recently tanked after it came to light that rival OnTheMarket is being acquired by American online real estate powerhouse CoStar Group. I took the opportunity to buy more of the stock for my portfolio.
Rightmove is an exceptional company, to my mind. Not only does it have a strong brand and a very high market share (around 85% of the UK property search market), but it also has an excellent track record when it comes to revenue growth and profitability (it’s one of the most profitable companies in the FTSE 100 index).
Now, after the recent share price fall, Rightmove shares were trading on a forward-looking price-to-earnings (P/E) ratio of about 18. That just seemed too cheap to me given the company’s high-quality attributes, so I bought more.
It’s worth pointing out that the acquisition of OnTheMarket does add a bit more risk to the investment case. I think Rightmove is likely to remain the number one player in the UK property search market, however, due to the strength of its brand.
Edward Sheldon owns shares in Rightmove
What it does: Safestore is the UK’s largest self-storage unit provider, with 131 stores nationwide.
There are a few reasons I’m attracted to the stock. First up, it looks cheap, with a price-to-earnings ratio of below 6. This is more than half of the FTSE 250 average.
What’s more, the stock also has a dividend yield of over 4%. In the last decade, its dividend has increased by a whopping 400%.
The business has posted strong growth in recent years. With it asserting its position as a leader in the UK, it’s now turned to European expansion as it continues to grow.
The debt on its books could be a slight concern. Aggressive interest rate hikes and the impact this will have on property prices could also impact the firm’s operations.
However, with plans for expansion, a low valuation, and a solid yield, I decided to buy more of the stock.
Charlie Keough owns shares in Safestore.
Scottish American Investment Company
What it does: Scottish American Investment Company is a FTSE 250 investment trust that aims to grow capital and the dividend faster than inflation.
My conviction in the management team’s stock-picking has grown stronger. Why? Well, the top two holdings are Microsoft and Novo Nordisk. Both companies are firing on all cylinders right now.
Excitement around AI has pushed up the share price of Microsoft (part-owner of OpenAI, the maker of ChatGPT) by 48% this year. Meanwhile, Novo Nordisk announced that Q3 sales of its weight-loss drug Wegovy rose more than eightfold year on year to nearly $900m.
Incredibly, SAINTS hasn’t cut its dividend since 1938! And the payout is soon expected to increase for the 49th successive year.
Granted, the yield today is fairly modest at 3%, which might mean the shares get overlooked for more eye-catching yields. But I’m happy to aim for sustainable, long-term dividend growth over yield size here.
Finally, the shares are trading at a 9% discount to the trust’s underlying assets. That’s pretty rare, historically speaking.
Ben McPoland owns shares of Scottish American Investment Company.
What it does: Zotefoams is a leading manufacturer of specialist foams, such as those used in Nike running shoes and in airline seats.
Current trading seems healthy to me, and management says the company is on track to hit City earnings forecasts for 2023. Zotefoams has also just expanded its exclusive deal with Nike, which could support further growth.
Looking further ahead, there’s some possibility that the company’s new ReZorce recyclable packaging material – used in drinks cartons — could become a big driver of earnings.
My main concern is probably that if the global economy slows, Zotefoams could see weaker demand from some of its top customers.
One other factor worth considering is that longtime chief executive David Stirling has just announced his retirement. Mr Stirling has been in charge since 2000.
However, the balance of risk and reward looks attractive to me at the moment. I think Zotefoams could perform well from current levels.
Roland Head owns shares in Zotefoams.