Key Points

  • E-commerce and digital payments are helping Shopify, Amazon, and Square to grow quickly.
  • These companies are already leaders in their respective markets and will continue to be, likely for years.
  • Even if the market takes a dip, Shopify, Amazon, and Square should make great long-term investments for those who hold onto these stocks.

Our experts issued a rare “Double Down” Buy alert on this one stock… Learn more.

This year has been anything but predictable, and investors’ shifting reactions to the election, the recession, and the pandemic have made anticipating the stock market’s movements even more difficult than usual. 

But even if the stock market takes a turn for the worse in the coming months, there are still great companies that investors can feel secure about buying and holding onto for the long term — among them, Amazon (NASDAQ:AMZN), Square (NYSE:SQ), and Shopify (NYSE:SHOP).

A red line graph pointing down.

Image source: Getty Images.

1. Square: At the intersection of e-commerce and digital payments

Consumers were already shifting a growing share of their shopping to online venues and using digital payments more frequently before the pandemic, but those trends have been significantly accelerated by COVID-19. 

Consider that in the third quarter, Square’s gross payment volume from its online channels jumped more than 60% year over year. E-commerce sales have skyrocketed, and now make up 16% of all retail sales in the U.S., up from 11% last year. And as that share continues to grow, Square’s online payment processing business will too. 

But that’s not the only growth driver for the company. Its Cash app, which can be used for peer-to-peer payments as well as payments to merchants, saw its app revenue (excluding bitcoin) skyrocket by 174% last quarter.

Digital payments and e-commerce will keep gaining popularity long after the pandemic is over, and even stock market instability shouldn’t derail Square from tapping into what, by 2024, is expected to be a $1.5 trillion digital payments market.

2. Amazon: The cloud computing and e-commerce leader 

If you’re looking for a company that’s still growing fast and can easily bounce back from economic storms or market dips, then Amazon is what you’re looking for. Consider that during this pandemic and recession, the company has hired 400,000 people. That’s no typo — 400,000.

Amazon’s e-commerce site has been experiencing higher-than-normal traffic ever since lockdowns and social-distancing protocols took hold.  Its sales spiked by 37% in the third quarter and its non-GAAP adjusted earnings per share soared to $12.37, up from just $4.23 in the year-ago quarter. The company’s strong performance has led investors to bid its stock up by about 70% year to date. 

But even if a market correction is looming, investors don’t need to worry about Amazon. Aside from its e-commerce business, it’s the leader in the public cloud computing space. Amazon Web Services holds a 33% market share, beating next-in-line Microsoft‘s 18%, and the public cloud computing market is relatively young. The analysts at market research firm IDC estimate that annual spending in this space will reach $500 billion by 2023.  

Between its powerhouse e-commerce business and its dominant position in cloud computing, Amazon can be expected to weather any upcoming market volatility.

3. Shopify: The “e-commerce for all” play 

Some e-commerce stocks took a hit earlier this month when Pfizer announced that its coronavirus vaccine candidate had proven more than 90% effective at preventing COVID-19 infections. The news led some investors to assume that soon everyone will go back to shopping in person at stores again and that online shopping will decline as a result. Shopify only fell 3% on the news. 

I think investors who sold off their e-commerce stocks on that vaccine news were being shortsighted. As already mentioned, this shift in consumers’ shopping habits was advancing at a strong clip even before the pandemic, and there’s no reason to assume that once a vaccine is available, everyone will stop wanting goods delivered straight to their doors. 

Think about it this way: Shopify has helped many small and medium-sized businesses connect with customers online for the first time this year. In many cases, its platform has allowed these companies to build up their customer bases in ways that wouldn’t otherwise have been possible.

In this way, Shopify has proved its worth to its clients. I think it’s unlikely that many small businesses will ever go back to thinking that they don’t need an online presence, and more likely that they will keep relying on those companies — like Shopify — that helped them adapt to this year’s rapid changes. 

The most important thing to remember 

Investing in these companies should be a profitable strategy, but the best way to build wealth in the market is to buy stocks and hold onto them for the long haul. Small dips and large corrections will certainly come. If you panic when the crowd does and sell your shares, then you’ll most likely end up forfeiting a large fraction of the gains you could have made by sitting tight. 

So the next time the market slides and you’re tempted to “cut your loses” and sell, pause. Look at each of your holdings, and see if your investment thesis for the stock is still the same. If it is, and nothing has fundamentally changed about the company, its leadership, or its products, then stay the course.