The internet celebrated its 50th anniversary recently. That seems like a long time ago, and it was.
And that’s largely because the internet didn’t really mean much outside government and academic circles for the first two or three decades.
But man, when it hit, it certainly blew up. And it has since changed everything about how we go about our days, work, shop and even entertain ourselves.
The other thing about the internet is it’s borderless. That means no trade war is going to do too much to slow down its ventures, especially to domestic markets (as long as the goods it sells are domestically made). And all that business needs to be advertised and marketed.
There’s big business in the internet. And it continues to expand.
Below are seven of the best internet stocks to buy right now. All of them earned an “A” rating from my Portfolio Grader, the proprietary stock-picking system behind Growth Investor. These are also global players — only two of the companies are U.S.-based — that will continue to grow as long as there’s an internet.
Vipshop Holdings (VIPS)
Vipshop Holdings (NYSE:VIPS) is an online discount retailer that started in China in 2008. It listed in the U.S. in 2012.
In China, its site VIP.com is one of the top three e-commerce companies in the country — and as you know, it’s a pretty big country.
The play here is the trade war. With imports slowing and the economy dragging, VIPS is well positioned to grow its market share in the domestic market selling fashionable women’s clothing at a discount, along with accessories and makeup.
Its current market capitalization is a respectable $7.8 billion and the stock is up more than 114% over the past year — in the teeth of the trade war.
As we’ve seen with Ross Stores (NASDAQ:ROST) in the U.S., after the tough times are over, it’s likely that VIPS will keep its newfound customer base for a very long time.
NetEase (NASDAQ:NTES) Is another Chinese company that is well known in its domestic market. And while it may not be as familiar to U.S. investors, NTES is a worthy competitor to a better-known Chinese company on this side of the Pacific: Tencent Holdings (OTCMKTS:TCEHY).
NTES is primarily a gaming company. But like many of these big online firms, it does a little bit of everything. While gaming is a core driver, there are ancillary businesses that orbit around gaming, like advertising, e-commerce and email accounts. Finding rock-solid business models like this is a core component of my Growth Investor strategy.
NetEase sports a market cap of $36.3 billion, so this isn’t a mom-and-pop operation. It is huge, and hugely popular. Recently it refocused on its gaming offerings and developing new games.
Remember, online gaming is becoming a major sport, with global revenue now eclipsing the NFL and NBA. Teenagers are gaming to make money instead of scooping ice cream.
Up 31% in the past year, there’s plenty of growth ahead.
Arco Platform (ARCE)
Arco Platform (NASDAQ:ARCE) is a Brazilian online education company, with a twist. It sells curriculum packages — both online and in print — to upscale private schools.
As you may know, Brazil has a very wide gap between the haves and the have-nots. Many business executives are flown to work by helicopters to avoid any issues with traffic and also potential kidnappings.
In this kind of world, public education isn’t a top priority and the country can only provide so much money to support public schools. Those that can afford it, send their kids to private schools.
And ARCE has stepped into that gap with curriculum for those private schools, so there is a standard of learning among them. It also likely allows those students to match up with peers in more developed countries if they look to pursue university educations abroad.
With a market cap of $2.1 billion, there seems to be demand. And ARCE stock is up 81% in the past year, so there are signs are that it has found a growing niche.
One caveat: ARCE stock just started trading last year, so the stock is still finding its footing and may be a bit volatile given its dependence on an emerging market economy.
Nic (NASDAQ:EGOV) is a U.S. company that focuses on digital solutions for local and state governments.
Basically, EGOV helps local and state governments upgrade their online platforms, integrate their departments, secure information and provide portals for internal and external users.
This is a very big undertaking and will last a very long time, which means that EGOV, as one of the two largest firms in this business, is in very good shape moving forward.
This business certainly isn’t as sexy as online gaming or gambling, but it is steady, reliable work with no end in sight. Any company that can help clients leverage the technology of the future to improve their operations is going to be in high demand, which is why I’m keeping a close eye on revolutionary technology trends with great investment potential.
The stock is up 67% in the past year, as tech investors have moved to safety, but its trailing price-to-earnings ratio is only 30. What’s more, it offers a decent 1.4% dividend, which signals that it’s shareholder friendly.
Qudian (NYSE:QD) is a relatively new company that is doing something that is very new in China: establishing and delivering consumer financing.
Traditionally, Chinese consumers didn’t lean very much on credit. But that is changing. And QD is using state-of-the-art technology like artificial intelligence and machine learning to transform consumer financing.
The implications are enormous. And there’s no doubt there will be competitors. But as we have seen time and again, the first company to plant a flag in a new and developing market has a huge advantage.
The stock is up 51% in the past year, yet its trailing P/E is under 7. And it has a $2.1 billion market cap, so it’s already going strong. This kind of growth story also looks very attractive to big players like banks and other diversified finance firms, even non-Chinese companies. This could be a takeover target with a big premium.
Perion Network (PERI)
Perion Network (NASDAQ:PERI) is an Israel-based advertising platform for businesses and publishers around the world.
Advertising remains one of the biggest challenges on the internet. There are so many levels of possibility, and audiences are so fractured across so many channels, it’s difficult to decide how to find, much less engage a target audience.
How do you decide among podcasts, videos, social media, websites and embedded ads? As marketers and advertisers come to grips with the current opportunities, new ones are popping and old ones are fading.
Being agile is what the internet is all about and that’s most visible in advertising. Staying up and keeping ahead are necessary, so platforms like the ones that PERI offers to businesses are in great demand.
This company has been public for a dozen years now, and has ridden the highs and lows over that time, but it’s still around and putting up some strong quarterly numbers. It only has a market cap of $131 million, so institutions aren’t big owners at that size, but the stock is up 73% in the past year and things are looking good. Just remember, this stock isn’t for the meek.
Digital Turbine (APPS)
Digital Turbine (NASDAQ:APPS) is an Austin, Texas-based firm that has been in the application development and integration space since 1999. You’d have to go back a decent amount of time to be able to land the APPS ticker symbol.
It’s still a relatively small player, with a market cap of $574 million. But it is on fire right now, beating earnings and growing quickly. The stock is up a whopping 354% in the past year.
It works with enterprise-level firms to develop apps and improve advertising, as well as deploying advertisements on other platforms.
Fiscal second-quarter earnings came in yesterday and blew out earnings and revenue estimates. The future is bright. But again, given its size, this stock may be more volatile than other, larger tech plays.
All this gives you an idea of why my Portfolio Grader continues to rate these stocks an “A.” And I’ve got more where that came from. There’s a bigger, deeper tech trend going on that I’m even more excited about.