Terrifying Market Conditions: 2 Stocks Worth Considering (DocuSign Edition)

Terrifying Market Conditions: 2 Stocks Worth Considering (DocuSign Edition)

“Terrifying” Market Conditions The market is down this year and people are scared. And compounding the financial pain is the extreme psychological pain driven by fear-mongering media narratives.

As an investor, you should recognize (1) The media doesn’t care about you (they just spew ridiculous emotional narratives in order to capture more eyeballs so they can get more advertising dollars), and (2) Disciplined, long-term, goal-focused investing is a winning strategy (forget the soup du jour—know your goals, stick to your long-term plan).

In this report, we review the current “terrifying” market conditions, but first share two stock ideas (one high-income, and one high-growth) that we believe are particularly interesting right now (depending of course on your own personal goals and situation). We have a special focus on DocuSign, so let’s start with that. DocuSign 1. DocuSign ( DOCU )

DocuSign is a pandemic stock that rose spectacularly to over $314 per share as the disingenuous media convinced investors that COVID would prevent people from ever interacting in person again for as long as they live, and therefore they needed DocuSign if they ever wanted to execute a document again. Like most rumors and conspiracy theories, the DocuSign narrative was based on some truth (it really is a convenient easy-to-use product that allows you to easily execute documents remotely—pandemic or not—and this type of solution is increasingly valuable in the massive and ongoing digital revolution that increasingly dominates the way work gets done).

However, from a valuation standpoint, DocuSign got way ahead of itself with price-to-sales multiple reaching nosebleed levels and revenue growth expectations unrealistically extrapolating pandemic anomalies that pulled forward years of future growth. DocuSign Stock (YCharts) DocuSign announced earnings on Thursday after the close, and even though revenue and earnings were strong, forward revenue growth guidance and analyst estimates have come down significantly, and the shares price has plummeted. To be clear, DocuSign is still expected to grow rapidly (2022 sales growth guide is 18%), and the total addressable market opportunity is still massive, it’s just not meeting the stupendous projections the pandemic fearmongers were pumping.

Most investors appreciate that, in the short term, market prices are often a whimsical narrative-driven voting machine, but in the long term markets do a much better job weighing the true value of a business. And in DocuSign’s case, the business does have long-term value, and the valuation has come back down to earth as the pandemic narrative pendulum now appears to be swinging too far in the opposite direction for many once-pandemic-darling stocks like DocuSign. Granted, DocuSign has a nice name and has some first mover advantages, but the reality is the competitive moat of the business is not enormously wide (i.e. many other companies can, and do, do what DocuSign does).

Nonetheless, we like that DocuSign is the leader in the digital signatures space, and that there really is a massive total addressable market opportunity to capture old-school non-electronic signatures, combined with the company’s high customer retention rates, strengthening operating margins and improving cash position. DocuSign Stock (DocuSign Quarterly Presentation) Exxon Mobil Stock (Exxon Mobil) 2. Exxon Mobil ( XOM ), Yield: 4.1%

Unless you have been living under a rock, you realize that gas prices in the US have been rising dramatically thanks to the tragic Russia-Ukraine conflict (Russia is a big global supplier of energy), the Biden Administration’s “environment first” approach to US energy independence (the US could produce ample fossil fuel energy domestically to keep prices low, but the Administration knows that would be political suicide with much of its base), and of course inflation (February year-over-year Consumer Price Index, released Thursday, was 7.9%, the highest level in over 40 years as the pandemic-easy-money-chickens have come home to roost!).

As mentioned, the stock market is down this year (the S&P 500 is down ~12%), and the only sector that has actually posting gains is the energy sector. Exxon Mobil is a direct beneficiary of higher oil prices, and the shares of Exxon Mobil have been extremely strong this year. Exxon Mobil Stock (YCharts) Obviously, well-known large-cap energy companies, like Exxon Mobil, face some of the most intense media fear-mongering narratives of any publicly-traded stock because of the large fossil fuel (pollution) footprint (when gas is burned to power your car it releases pollution that is harmful—although how harmful is widely debated—despite any “settled science” narratives you may hear).

The question for many investors is whether or not it is too late to invest in energy stocks like Exxon Mobil. On one hand, oil […]

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