Stocks

Must Buy Large-Cap Stocks in January

A person does not need to sacrifice growth to be able to go big. It is a usual misconception that to find millionaire-making stocks, and a person must invest in small growth companies. However, the truth is, that is not the case. There are a lot of large-cap stocks that are developing quickly and could multiply the initial investment in just a short amount of time.

Nintendo

If investors bought shares of Nintendo back in January 2017, a few months ahead of the launching of the Switch console, they would have already doubled their money. The Switch has been a blessing for the Japanese gaming giant. It sold 41.67 million units through the end of September. Trading at a price-to-earnings ratio of 34, the stock is undoubtedly not cheap. However, there are good reasons as to why investors are paying a premium for the shares right now. Now, the stock might not go higher from here based on more sales of Switch consoles. Even though there were strong sales of the game system over the last year, including the launch of the Switch Lite, full-year sales are only expected to boost by 4.1% this fiscal year, ending in March. The system is selling well, but it is not enough to ignite incremental growth on the top line. Starting from here, the stock could climb higher based on improving margins and growing profits. Most of Nintendo's software sales are from digital sales. And these include full-game downloads, Switch Online subscriptions, and add-on content for games. But at just 36% of sales, Nintendo's percentage of game sales that were from digital channels is a lot more lower than other game makers like Activision Blizzard, Electronic Arts, and Take-Two Interactive. These firms generate about three-quarters of their revenue from digitally delivered content, much higher compared to Nintendo. Then, another catalyst for the stock could be stronger-than-expected sales of the Switch in China. But analysts are not expecting high numbers due to Chinese players being historically not interested in playing on console game systems. But still, Nintendo's partnership with Tencent to launch the hardware in China might pay off. Nintendo has exclusive gaming brands that a user can't play on anything else except for Switch. And Tencent has a robust marketing pull with over one billion users across its social media apps, QQ and WeChat. In total, Nintendo is a classic gaming brand. And it has a growing installed base of Switch owners who will possibly spend more money on games over the next year. Aside from that, there is also the increasing push into mobile games, in which its recent Mario Kart Tour has performed well. And the stock must keep a good investment even at these elevated levels.

Square

Now for Square, it has been an up and down battle between the bulls and the bears over the past year. However, its revenue growth stayed robust, coming in at 44% year over year in the third quarter. And that is enough reason for the company to raise its full-year guidance. Meanwhile, it has been hard for investors to get a handle on Square's lack of profitability - the firm continues to plow everything back to its futures growth. But it is not a bad thing to have a long-term mindset. The investments of Square in seller tools for merchants gained a quick payback on investment within about four quarters. The seller ecosystem is on pace to earn an adjusted EBITDA (earnings before taxes, interest, depreciation, and amortization expense) margin of almost 30% this year. Another significant aspect of Square's future growth is the Cash App. This is one of the most widely used peer-to-peer payment apps. And the firm will further expand the ways individuals can engage and use the app as a daily cash utility tool. The recent move is to ket Cash App users to trade fractional shares of stocks. As a result, this would open the door for even more people to join the app and take advantage of the all-in-one solution Square id providing for daily finances. Not putting the bitcoin transaction, the Cash App generated revenue of $159 million in the third quarter, more than doubling year over year. It is not making a profit yet. However, further top-line growth like this will someday lead to the Cash App in the green as scale kicks in.

   

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