1 Favorite Stock to Buy for 2022 and Beyond
Are you searching for top stocks to buy and hold in 2022 and beyond? Even as the market continues to be rocked by serious bouts of volatility, it's still a great time to buy into great companies with quality businesses. And right now, you can often snag fantastic stocks at bargain valuations.
In this segment of Backstage Pass , recorded on Jan. 5 , Fool contributor Jamie Louko shares with fellow Fool contributors Rachel Warren and Trevor Jennewine one of his favorite tech stocks for investors to consider buying right now.
Find out why Snowflake Inc. is one of the 10 best stocks to buy now
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Rachel Warren : Energy and real estate are already leading the U.S. equity sector returns in 2022, just as they did in 2021.
In your opinion, what sector do you think will be the highest performing in 2022? We're going to do some predicting here. What's your top stock play in that sector? Jamie, why don't you take this one first?
Jamie Louko: Yeah, so I might be a bit biased here because roughly about 50% of my portfolio, excluding my Roth IRA, is in tech stocks. But I am going to go with tech and specifically big data companies, mostly because data is rapidly growing and I'm going to share my screen here real quick. It's rapidly growing and it's not really affected by any part of the macro-economy or inflation for the most part. My top company in this area is Snowflake (NYSE: SNOW) .
Snowflake is a data storage platform for enterprise customers and it's based on a usage-based model, which means it only charges for when the customers want to query and analyze their data, which is a really different business model.
Usually, people charge for storage space, but Snowflake doesn't do that, it's based on how much the company wants to use the data. What I really like about Snowflake and the industry at large is that it is massive.
Something that I really blew my hair back when I read is 90% of the world's data has been created in just the past two years and over the next two years, that data is expected to double. Considering that Snowflake is free to put your data onto, and then you only charge when you want to query that data, it makes it really easy for enterprises to start using Snowflake because they're getting a lot of data right now.
A bunch of data is being created right now. Then it's really easy to put your data in and then once you're in, you're locked in tight because it's really hard to move that data around and take it out and then put it into AWS or Azure or Google (NASDAQ: GOOG) (NASDAQ: GOOGL) Cloud or something like that. The fact that it's really easy to get in, but really sticky once you're in.
Because you only have to pay based on when you query it, is a really strong business model, I think. Clearly, it's played out in the financials. The net retention rate in its third quarter is 173% which is one of the best net retention rates I've seen in a company.
That increased not 5% but five percentage points from 168% in the year-ago quarter, which is really strong and 148 customers are spending over $1 million, which really shows how critical Snowflake is and more importantly, how important it is for its customers.
Growing 128% like that, it clearly shows the enterprises are gaining a lot of data and they're noticing, hey, it's free to put in and I only pay when I need it and when I want to analyze the data. They're noticing that wow, I'm analyzing this data a lot and I'm spending a lot with Snowflake.
Just to put into perspective, there was over 1.3 million daily queries in Q3. Because they are a usage-based model, the remaining performance obligations are $1.8 billion, which are basically contracts that the enterprises sign to say, hey, this is how much I will spend in the future. I'm not going to use it now, but I plan on spending this money in the future and that grew 94%.
When we were talking about an inflationary environment with scares about inflation, macro-economy, all those scary big macro-economic topics, it's really comforting to find a business that isn't really impacted by that. It's part of such a massive trend that the growth in the industry alone could push it really far.
Vihaan, I saw your question in Slido talking about some of my top stocks. This is definitely one of them. This is one company that I really, really like. The only reason I'm not buying more right now is because it's already a pretty big position in my portfolio.
Warren: Awesome, that's a great company. What about you Trevor?
Trevor Jennewine: Yeah, Jamie, I really like Snowflake. I think they have a strong competitive position. I think the ease of use of the platform is very compelling.
I think the cloud-agnostic nature, the fact that it works with AWS, Google, Microsoft (NASDAQ: MSFT) Azure is another big selling point there. I am going to say that I think the tech sector will be at the top in 2022. That might be a biased pick.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Jamie Louko owns Snowflake Inc. Rachel Warren owns Alphabet (A shares). Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Microsoft, and Snowflake Inc. The Motley Fool has a disclosure policy .