2 stocks that are much more likely than AMC to make you rich
As memes stocks and cryptocurrencies dominate the financial media, it’s hard not to enjoy the spectacle. AMC Entertainment (NYSE: AMC) climbed 2,400% this year alone, even though many of its sites have been closed for a year. He even recently reported a 90% drop in sales year over year. Although subject to wild swings, the company’s current market cap is $ 23 billion.
Two companies that are roughly the same size but seem to offer much more promising prospects are ResMed (NYSE: RMD) and the To exchange Office (NASDAQ: TTD). They might not capture the attention of social media, but they generate the kind of sales, profits, and growth upon which investments that outperform the market are built. Let’s take a look at some of the reasons each may offer better returns than AMC stocks.
ResMed is the abbreviation for “respiratory medicine” and marketed the Continuous Positive Airway Pressure (CPAP) machine for sleep apnea three decades ago. It has since extended its reach to chronic obstructive pulmonary disorders (COPD) and other diseases. The company has maintained solid growth through innovation in comfort, noise and ease of use.
Like AMC, sales have been impacted by the pandemic. Its year-over-year growth stabilized in 2020 after five years spent consistently between 9.5% and 13.5%. This is where the similarities end. Even before the pandemic darkened all of AMC’s operating measures, ResMed was creating significantly more profit before interest and taxes (EBIT) from its sales than the movie chain. This margin is a good measure of the profitability of the company without accounting adjustments.
The market for its CPAP machines is huge and growing. A 2019 study estimated that 424 million people worldwide have moderate to severe sleep apnea, and management estimates that around 80% of people in the United States go undiagnosed. The global population of people with COPD is approximately 380 million and is estimated to cost the health systems of the United States and Europe approximately $ 50 billion per year each. This huge population and cost is driving patients and physicians to adopt ResMed’s solutions. The company currently has around 32% market share in the flux generator market (behind 63% for Philips), which allows it to continue its orderly growth. For investors thinking of long-term stability, the winds behind ResMed should continue to blow for decades.
2. The trading post
The Trade Desk might be the perfect stock to buy as an antithesis to AMC. While AMC relies on people coming out and going to see a movie, The Trade Desk provides digital advertising solutions to help ad buyers create, manage and optimize multi-channel advertising campaigns. That means advertising on mobile, smart TV, audio, social media, and display ads – all the places someone can stream content when they decide to stay home. Whenever this happens, AMC loses and The Trade Desk wins. It happens more and more. The company recorded $ 4.2 billion in gross spend on its platform last year. This was only $ 552 million in 2015.
In contrast, the number of tickets sold at the box office has been slowly declining over the past 25 years. Exceptional years like 2002 (with a the Lord of the Rings, Harry potter, and Star wars film) and 2009 (with a single film as Avatar) will occasionally break the trend. Even before the pandemic, sales growth highlights the difference between the two companies.
Does he invest or speculate?
Research suggests that our brains are hardwired to experience financial loss more than gain. Unfortunately, greed and the fear of missing out can blind us to risk until it’s too late. For some holders of AMC Entertainment, the current mania and fantastic gains in 2021 may eclipse the underlying performance and outlook for the business.
A great litmus test is imagining your bank account with enough money to just buy AMC, ResMed, or The Trade Desk. The rational choice would be one of the companies with a growing customer base, increasing sales, and a lot of money. It might be boring, but that’s what investing in stocks is all about.
Buying an asset just because someone else might buy it for more is speculation – and speculation is a nicer way of putting the game. AMC stock could rise in the short term, gambling is a risky way to make money. This is especially true if you can’t afford to lose it. A better way to get rich is to buy big companies and own them for a decade or more.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.