Now, as an investor in Upwork (I view it as a speculative ‘moonshot’ growth stock), I’m obviously disappointed with this abysmal performance. However, I believe the stock’s capable of staging a rebound.

And I’m clearly not the only one with this view.

Activist investor on board

One hedge fund that sees value in the stock right now is activist investor Engine Capital (a value-oriented special situations fund). It announced last week in an open letter that it’s taken a 3.5% stake in the small-cap company.

It reckons Upwork has a great deal of potential that’s not being realised. And it believes the stock’s currently “deeply undervalued“.

We invested in Upwork because of its promising position as the world’s largest work marketplace, its significant addressable market given the growing acceptance of remote work, its potential to meaningfully disrupt the workforce solutions industry, and our belief that the company is deeply undervalued.

Engine Capital

Looking ahead, it wants to see Upwork:

• Improve the basic functionality of its freelancer marketplace
• Focus on enterprise clients (large-scale organisations)
• Optimise its cost structure
• Buy back undervalued shares
• Strengthen the board
• Align executive compensation to shareholder value creation

The investment firm believes that a “tremendous amount of shareholder value” can be unlocked if Upwork’s board acts with urgency to make the necessary changes.

My view

Now, as both an investor in Upwork and a long-term user of its freelance platform, I have to say I think Engine Capital’s ideas are excellent. I genuinely believe that Upwork has so much potential from an investment perspective but, right now, it feels like management’s asleep at the wheel.

I also agree with Engine Capital in relation to Upwork’s valuation. With the company currently trading on a forward-looking price-to-earnings (P/E) ratio of just 9.5 (about half the US market average), I think this stock’s extremely undervalued. It’s worth noting that revenue continues to grow at a healthy pace (last year it climbed by 11%). Given the level of top-line growth, there’s potential for a much higher valuation here.

Risks vs reward

It’s worth pointing out that even if Upwork’s management was to implement all the strategies proposed by Engine Capital, the company’s still likely to face challenges in the years ahead.

For starters, there’s the threat of artificial intelligence (AI). This could actually eliminate a lot of the jobs on the Upwork platform (writing, coding, graphic design, etc). Then, there’s competition from rivals such as Fiverr and Toptal.

I remain optimistic in relation to the company’s long-term prospects though, as I reckon the gig economy’s only going to get bigger in the years ahead.

Ultimately, I see a lot of investment potential here and think it’s worth considering.

The post Down 85%, this growth stock’s been described as ‘deeply undervalued’ appeared first on The Motley Fool UK.

Apple

One stock that strikes me as a buy as we begin August is Apple (NASDAQ: AAPL). The tech giant has a huge amount of momentum right now. Last week, the company posted its third-quarter results for the period ended 26 June and the numbers were very strong.

For the quarter, the company generated record revenue of $81.4bn, up 36% year-on-year, along with earnings per diluted share of $1.30, up from $0.65 in Q3 2020. When you consider that Apple is a $2.4trn company, that level of growth is pretty incredible.

In my view, Apple’s valuation is very reasonable at present. Currently, the consensus earnings forecast for the year ending 30 September is $5.54. That means Apple’s forward-looking P/E ratio is about 26. As such, see a lot of value on the table right now.

One risk here is regulatory intervention. Currently, Apple makes huge profits from its App store. Regulators could step in and force the company to lower its fees.

But I’m comfortable with the risks though. Overall, I think Apple is a great stock to buy right now.

Diageo

Another stock I like for August is Diageo (LSE: DGE). It’s one of the world’s leading alcoholic beverage companies. Its brands include Smirnoff, Tanqueray, and Guinness.

Diageo posted a strong set of half-year results last week. For the six months ended 30 June, the group generated organic net sales growth of 16%, with growth across all regions, along with a 7.4% increase in adjusted earnings per share. On the back of this growth, the company raised its dividend by 5%.

And in an upbeat message investors, CEO Ivan Menezes said: “I remain optimistic about the growth prospects for our industry, with spirits continuing to gain share of total beverage alcohol globally and premiumisation trends remaining strong. I believe Diageo is very well positioned to capture these exciting opportunities to drive long-term sustainable growth and shareholder value.”

Diageo currently trades on a forward-looking P/E of about 27. That valuation doesn’t leave much room for error. If sales growth slows, the stock could underperform.

I think DGE is a good stock to own in the current environment however. It’s worth noting that analysts at Credit Suisse just raised their price target to 3,950p.

Upwork

Finally, I see Upwork (NASDAQ: UPWK) as a strong buy as we begin August. It operates the world’s largest freelance employment platform.

Businesses across the world are embracing freelance workers at the moment and Upwork is benefitting from this trend. In its second-quarter 2021 results, published last week, the group reported year-on-year gross services volume (GSV) growth of 50% and revenue growth of 42%.

Meanwhile, non-GAAP net income came in at $4.6m compared to a non-GAAP net loss of $3m in Q2 2020. Looking ahead, Upwork said it expects revenue growth of around 30% for the full year.

Investors should be aware that Upwork’s a highly volatile stock. This is illustrated by the fact that after these great results, the stock actually fell about 15%.

Overall however, I think the long-term risk/reward proposition here’s very attractive. I think this stock has a lot of growth potential.

The post Best shares to buy: 3 stocks I’d snap up in August appeared first on The Motley Fool UK.

Recently however, growth stocks have begun to make a comeback. This month, for example, the S&P 500 growth index is up about 4%. By contrast, the S&P 500 value index is down about 2%.

I wouldn’t be surprised to see this trend continue in the second half of 2021 as investors refocus on secular growth trends. With that in mind, here’s a look at two top growth stocks I’d buy today.

A top growth stock for 2021 and beyond

One of my top picks in the growth space is Upwork (NASDAQ: UPWK). It operates the world’s largest freelance employment platform. This matches highly-skilled workers, such as software developers, lawyers, graphic designers, and copywriters, with businesses that have projects that need to be completed. Last year, Upwork generated revenue of $374m, up 24% year-on-year.

Looking ahead, I believe Upwork has significant growth potential. In the short term, the company should benefit as the global economy picks up speed and businesses hire staff to expand. I think many of those businesses will turn to the freelance market for flexibility. Meanwhile, in the long run, the company should benefit as the freelance market grows. Experts believe that between now and 2025, the global freelance platform market will see growth of around 16% per year.

There are risks to the investment case, of course. One to consider here is the threat of competition. Upwork faces competition from a number of companies including the likes of Fiverr, Toptal, and PeoplePerHour. Another risk is the stock’s quite volatile.

I’m comfortable with these risks however. I think this growth stock has an attractive risk/reward profile. I’ve made UPWK a substantial holding in my own portfolio and I plan to hold the stock for the long term.

A top cybersecurity stock

Another growth stock I’d snap up today is Okta (NASDAQ: OKTA). It provides identity management solutions to businesses. It has a blue-chip customer base that includes the likes of WPP, Renault, FedEx, and Pret. Last year, the company generated revenue of $835m, up 42% year-on-year.

Okta lies at the intersection of two massive growth industries – cloud computing and cybersecurity. Across the world, companies are rapidly moving to the cloud in an effort to enhance their agility and reduce costs.

At the same time, they’re focusing heavily on cybersecurity. They need to ensure that those using their platforms are who they say they are. This is where Okta comes in. Its solutions enable businesses to securely connect their employees with their cloud-based platforms.

While I believe Okta has attractive long-term growth prospects, there are some risks to be aware of. One is in relation to the company’s valuation. At present, Okta has a market-cap of $36.6bn and a forward-looking price-to-sales ratio of 30. That’s high. If future growth is disappointing, this stock could take a significant hit. The recent $6.5bn acquisition of Auth0 also adds risk.

Overall however, I think Okta has a considerable long-term appeal. I think this stock is a good way to play the cybersecurity growth story.

The post Growth stocks are rising again. Here are 2 I’d buy today appeared first on The Motley Fool UK.

Here, I’m going to highlight three growth stocks that I believe are a good match for me, a risk-tolerant, long-term investor. I believe these stocks are some of the best shares to buy today.

A reopening stock

The first stock I want to highlight is Visa (NYSE: V). It operates the largest payments system in the world.

The reason I’m bullish on Visa is that the US economy looks set to boom this year. America is reopening at a rapid rate and cashed-up consumers are unleashing pent-up demand. Las Vegas hotels, for example, are seeing very strong booking numbers. Visa should benefit from this economic strength. Across the US, there are around 340m Visa credit cards in circulation.

This is not just a reopening stock, however. The long-term story looks very attractive too. Over the next decade, trillions of transactions are set to shift from cash to cards and e-payments.

I’ll point out that Visa stock is quite expensive. Currently, the stock sports a forward-looking P/E ratio of about 40. This adds risk to the investment case. However, this is a dominant company that’s very profitable. So, I’m comfortable with the high valuation.

An emerging markets play 

Another stock I’d buy right now is Diageo (LSE: DGE). It’s a leading alcoholic beverage company that owns a wide range of top brands including Johnnie Walker, Smirnoff, and Tanqueray.

My investment thesis here is pretty simple. As the world reopens in the year ahead, people are going to celebrate with their friends and family. A considerable amount of alcohol is likely to be consumed. Diageo should benefit.

Like Visa though, this is not just a short-term play. In the long run, Diageo should benefit from its exposure to world’s emerging markets where wealth – and demand for premium products – is rising rapidly.

Diageo shares have had a strong run since November. So, there’s always the risk of a pullback. However, City analysts have been upgrading their earnings forecasts recently. This could support the share price. The stock’s forward-looking P/E ratio of 26 seems reasonable, to my mind. I also like the 2% yield on offer.

A disruptive stock

Finally, on the more speculative side, I like Upwork (NASDAQ: UPWK). It operates the world’s largest freelance employment platform. Through this platform, skilled freelance workers can gain access to a vast range of jobs.

Upwork has grown at an impressive rate in recent years (three-year revenue growth of 84%) and I expect the strong growth to continue. As economic conditions pick up post-Covid-19, businesses are likely to hire more staff. In many cases, they will turn to freelancers for flexibility.

This is another stock that has substantial long-term growth potential. Right now, the employment landscape is undergoing a huge shift with both employees and employers turning to the freelance market due to the benefits it offers. Between now and 2025, the global freelance platform market is expected to grow at around 16% per year.

Upwork is still relatively small. Its market cap is just $5.5bn. This means it’s likely to be volatile. I’m happy to ride out this volatility, however. Overall, I think the long-term risk/reward proposition here is favourable.

The post Best shares to buy: 3 growth stocks I’d snap up now appeared first on The Motley Fool UK.

Having said that, I’m taking advantage of opportunities when I see them. With that in mind, here’s a look at three stocks I bought for my portfolio last month.

A FTSE 100 reopening stock

The first I bought (more of) was Smith & Nephew (LSE: SN). It’s a leading medical technology company that specialises in joint replacement systems, sports medicine, and advanced wound management. I picked up some shares at 1,380p a pop.

The reason I bought SN was that I see it as a great ‘reopening’ stock. This company experienced significant challenges last year as elective medical procedures were postponed, due to Covid-19.

However, now that the world’s reopening, business is picking up. Indeed, in a trading statement posted last week, the company said Q1 2021 revenue was up 6.2% on an underlying basis. For the year, it’s targeting top-line growth of 10-13%.

Of course, if the Covid-19 situation deteriorates, SN could experience challenges again. This is a risk to consider. However, I’m not too concerned about short-term setbacks. This is a stock I plan to hold for the long term in order to capitalise on the world’s ageing population.

A gig economy stock

The next stock I bought (more of) was Upwork (NASDAQ: UPWK). It operates the world’s largest freelance employment platform, which I use myself as a freelancer. I bought some more shares at the $44 level.

Regular readers will know I’m a big fan of this stock – it’s one of my largest holdings. The reason I’m so bullish is that I expect the ‘gig economy’ (or ‘talent economy’) to grow significantly in the years ahead as people realise that, due to technology, they no longer need to work 9-to-5 jobs. These days, if you have a skill set, you can market that to companies all over the world and work from anywhere.

Upwork is a more speculative stock. Currently, the company is only generating small profits. The valuation is quite high too (the price-to-sales ratio is 13), which adds risk. I’m comfortable with this risks though. While it’s a larger holding for me, it represents less than 5% of my overall investment portfolio.

A Warren Buffett stock

Finally, I started a position in Visa (NYSE: V), a stock owned by Warren Buffett. It’s the largest payments company in the world. For every $1 spent in physical locations globally, around 15 cents goes through the Visa network. I paid $233 per share for my shares.

I bought this stock for a few reasons. Firstly, I think the US economy is going to boom in the next 12 months (in Q1, GDP grew 6.4%). I see Visa as a good way to capitalise on US consumer spending.

Secondly, I expect Visa to benefit as travel picks up. It generates a large proportion of its revenues from cross-border transactions.

Third, I expect the company to benefit as the world shifts away from cash in the years ahead.

Visa is an expensive stock. Currently, the forward-looking P/E ratio is a little over 40. This adds risk. I’m comfortable with this valuation though. This is a high-quality company that’s very profitable.

The post Here are 3 stocks I bought last month appeared first on The Motley Fool UK.

Today, I’m going to highlight two growth stocks that are currently held across Baillie Gifford funds. I think these stocks have considerable long-term growth potential and I’d be happy to buy both for my own portfolio today.

A Baillie Gifford ‘gig economy’ stock

One stock I’m very bullish on from a long-term investment point of view is Upwork (NASDAQ: UPWK). It operates the largest freelance employment platform in the world. Baillie Gifford is a top five shareholder here, owning about 3.6% of the company.

There are a few reasons I like this stock. The first is that I believe Upwork offers a brilliant service. I’ve personally used its platform for many years (both as an employee and an employer) and found it to be fantastic.

The second is that the company is growing rapidly. Over the last five years, revenue has climbed from $164m to $374m.

The third is that the freelance market is forecast to get much bigger in the years ahead. In 2020, the ‘gig economy’ was worth around $300bn. However, by 2023, it’s expected to be worth over $450m. This should benefit Upwork.

Finally, Upwork should benefit from a stronger global economy. As economic conditions improve, businesses are likely to hire more freelancers.

There are risks to consider here, of course. One is the valuation. Currently, the stock sports a market-cap of $6bn. This means the forward-looking price-to-sales ratio is 13. That’s quite high. If future results are disappointing, the stock could fall. Another risk is competition from rivals such as Fiverr. It could steal market share.

However, I’m comfortable with these risks. Overall, I see a lot of investment appeal here.

An online shopping powerhouse

Another Baillie Gifford stock I think has a lot of long-term growth potential is Shopify (NYSE: SHOP). It operates an e-commerce platform that makes it extremely easy to launch an online store. Currently, it has over 1m merchants on its platform. Baillie Gifford is the second-largest shareholder here, owning about 5.1% of the stock. It’s currently the largest holding in its American fund. 

The main reason I’m bullish on this stock is that the e-commerce market is expected to grow significantly over the next decade. Last year, global online retail sales amounted to around $4trn. However, by 2027, it’s expected to hit $10trn. This industry growth should provide huge tailwinds for Shopify. This year, Wall Street analysts expect the company to generate revenue growth of around 40%.

While I’m bullish here, this isn’t a stock I’d load up on. That’s because it currently sports a price-to-sales ratio of about 37. That valuation is very high, meaning there’s considerable valuation risk here. If growth slows, this stock could take a hit.

I’d be happy to buy a small position for my diversified portfolio though. As always, it’s about balancing risk versus reward.

The post Two Baillie Gifford stocks I’d buy today (which aren’t Tesla) appeared first on The Motley Fool UK.