I Am Pounding the Table on these Stocks
Why do I think $10.00 is some magical level? I don’t, although I do think it is a psychological level for many investors. Buying cheap stocks is different from buying stocks that are cheap. Does that make sense? Just because a stock is priced below $10.00 per share, it does not mean it is cheap. With the total market decline this year extending into the holiday season, it’s pretty clear that 2022 is just going to be a write-off for many investors.
But good companies have also seen intense selling pressure and their stocks continue to get cheaper with each passing day. Is it time to buy them though? I won’t quite use the term hand over fist here, but I’m certainly willing to pound the table at these low prices.
Palantir (NYSE: PLTR)
I’ve written about Palantir in the past and I’ll continue to do so because I believe in what this company is doing. Would I prefer the company to be profitable by now? Of course! But Palantir continues to show signs of growth even in this difficult economic environment. This past week the company announced several new partnerships that will bolster its much-maligned commercial segment.
Palantir has recently partnered with Lockheed Martin (NYSE: LMT), Integrity Tool and Mold, and Crisis24 in its commercial division. It also signed a new five-year $443 million contract with the CDC. Despite all of this news, Palantir’s stock fell by about 3.0% for the week. The stock is trading well below both its 50-day and 200-day moving averages and its price-to-sales ratio is trading at an all-time low. Palantir continues to grow its customer portfolio when enterprise spending is at multi-year lows. Perhaps most importantly in my mind is that Palantir really does not have any competition. There are other data analytics firms but none are more trusted by the US government. As the stock approaches $5.00 per share it’s absolutely worth taking a speculative starter position in Palantir.
Olo (NYSE: OLO)
Ever hear of Olo? Chances are you have used their products when eating out at a restaurant in America. Olo is a SaaS platform that provides ordering, delivery, and payment services to restaurant chains. Now, I get it. Ever since the pandemic, restaurants just haven’t been the same. But Olo’s software platform provides technology solutions for dine-in, take-out, and deliveries. The company saw some massive growth between 2018 and 2021 where it saw a 67% CAGR in revenue increases.
Olo’s stock has taken a beating this year. Why? Because unprofitable SaaS stocks get hammered in high-interest rate environments. This should come as no surprise as these companies rely on borrowing cash to fund their business and as rates rise, it leads to lower earnings. But one thing to note about Olo: its gross margins are already at over 70% and this should grow as the company reinvests its revenue into improving its systems. At a price-to-sales ratio of 6.58 and the stock currently trading at below $7.00, this is one under-the-radar SaaS business that could explode in a couple of years. This one will take some patience, but those gross margins will one day turn into some major profit for Olo.