It’s often said that we should “invest in what we know.” Understanding how a business works is absolutely important, which leads many investors to ownership of companies they use or interact with on a regular basis. However, sometimes the best investments are boring, under-the-radar companies that don’t do anything all that exciting but are nonetheless absolutely crucial to keeping the world moving.
Fortinet (NASDAQ:FTNT), Ubiquiti (NYSE:UI), and Zebra Technologies (NASDAQ:ZBRA) are those kinds of companies. Here’s why three Fool.com contributors think they’re a buy right now.
The world needs data centers more than ever
Nicholas Rossolillo (Fortinet): Everyone knows how important cybersecurity is, but most cybersecurity stocks are far from household names. Even among the few growth investor darlings (like CrowdStrike Holdings (NASDAQ:CRWD), for example), Fortinet is often overlooked. It’s categorized as a “legacy” security company, one that predates this era of cloud computing and isn’t growing as fast as its cloud-security peers.
That’s a real shame, though, because Fortinet’s products and services are more important than ever. The pandemic has accelerated the use of cloud-computing services, with data centers functioning as the basic computing units of the cloud. Keeping data centers and networks that connect to them safe and secure is an absolute necessity.
Fortinet just so happens to make some of the best security hardware around, specializing in the design of firewalls (a device that monitors and controls traffic passing through a network) and the chips that power them. Fortinet has been mastering its craft for decades and has built a sizable subscription-services business atop this security-hardware business.
The proof this is no legacy security outfit is in the numbers. Fortinet’s revenue and free cash flow grew a respective 630% and 780% over the last 10-year stretch, including 29% revenue growth and 32% free cash flow growth in 2021. Management is forecasting at least another 28% increase in sales in 2022.
It’s no wonder Fortinet stock has come out of the recent high-growth, tech-stock sell-off relatively unscathed and is still sitting on just over a 100% return in the last year. Given the company’s enduring momentum, this remains my personal favorite among cybersecurity stocks.
It’s time to take a ride on that Zebra
Anders Bylund (Zebra Technologies): Barcode-scanning giant and information-management expert Zebra Technologies reported fourth-quarter results on Thursday. The company edged out analyst estimates across the board, issued full-year guidance in line with analyst projections, and boosted its long-term targets for annual sales growth from 4.5% to 6%. Zebra achieved all of this amid a global supply chain meltdown that forced the company to pay a steep premium for expedited freight.
And Zebra’s stock fell more than 12% over the next two days. Go figure.
The Zebra bears focused on a modest slate of guidance figures for the first quarter, settling for 2% year-over-year revenue growth as the supply of electronic components grows even tighter. They are also ignoring the fact that Zebra is tackling the shortages. The company has redesigned some of its most popular barcode-scanning tools to use commonly available parts instead of more advanced chips with longer lead times. Zebra has also negotiated firm supply commitments for its most important components.
Production expenses will rise a bit as a result, but Zebra is raising its prices …….