11 Best Motley Fool Stocks To Buy Now

Published on October 9, 2022 at 3:37 pm by Omer Farooq in Hedge Funds, News

In this article, we will look at the 11 best Motley Fool stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Motley Fool Stocks To Buy Now.

The Motley Fool is a Virginia-based financial services and investment management company, founded in 1993 by David Gardner and Tom Gardner. The firm’s investment management arm, Motley Fool Asset Management, is led by Bryan Hinmon, a certified financial analyst (CFA) who manages roughly $1.06 billion in 13F securities through Motley Fool Asset Management as of the second quarter of 2022.

Motley Fool Asset Management’s Investment Strategy and Philosophy

Motley Fool Asset Management has a long-term investing style. The fund invests in “quality stocks” based on company fundamentals and business models and holds its positions for longer periods of time rather than investing on a short-term time horizon. The Motley Fool also offers a premium subscription through which it recommends its top-quality stocks to average investors and recommends holding them for at least 5 years.

Motley Fool Asset Management’s Stock Portfolio and Performance

Motley Fool Asset Management is a long-term investment management company that holds through market volatility, which explains the fund’s average quarter-on-quarter return of 1.7% over the past eight quarters. The fund had a strong second quarter in 2022 and generated a quarter-on-quarter return of 15.39% for the quarter ending June 30, 2022. In the second quarter of 2022, Motley Fool Asset Management increased its exposure to 40 securities, added 12 new stocks to its portfolio, exited 18 companies, and reduced its exposure to 162 equities. The fund has a top ten holdings concentration of roughly 34% and its top five holdings include some of the best-in-class names such as Alphabet Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT). These stocks, among others, are discussed in detail below.

Photo by Roberto Júnior on Unsplash

Our Methodology

We reviewed Motley Fool Asset Management’s 13F filings as of June 30 to determine the best Motley Fool stocks to buy now. We picked the top 11 holdings and ranked them in increasing order of Motley Fool Asset Management’s stake in them.

Best Motley Fool Stocks To Buy Now

11. Paycom Software, Inc. (NYSE:PAYC)

Motley Fool Asset Management’s Stake Value: $17,147,000

Percentage of Motley Fool Asset Management’s 13F Portfolio: 1.61%

Number of Hedge Fund Holders: 43

Paycom Software, Inc. (NYSE:PAYC) is an American software company that provides HR payroll software and data analytics among other software products. The company is cash-rich and invests in itself. On August 15, Paycom Software, Inc. (NYSE:PAYC) announced that it is increasing and extending its share repurchase program of $550 million by $1.1 billion. The new share repurchase program brings its existing authorization to $1.65 billion, which the company expects to complete by August 15, 2024. The company has free cash flows of $210.69 million.

Wall Street is bullish on Paycom Software, Inc. (NYSE:PAYC). This August, KeyBanc analyst Jason Celino raised his price target on Paycom Software, Inc. (NYSE:PAYC) to $432 from $390 and reiterated a buy-side Overweight rating on the shares. On September 1, Citi analyst Steven Enders started coverage of Paycom Software, Inc. (NYSE:PAYC) with a Buy rating and a $457 price target. Paycom Software, Inc. (NYSE:PAYC) is ranked among the top holdings of Motley Fool Asset Management and is among the best Motley Fool stocks to buy now.

At the end of Q2 2022, 43 hedge funds were long Paycom Software, Inc. (NYSE:PAYC) and held stakes worth $1.20 billion in the company. Of those, $17 million were of Motley Fool Asset Management Company. The investment covers 1.61% of the fund’s 13F portfolio.

Here is what Kerrisdale Capital had to say about Paycom Software, Inc. (NYSE:PAYC) in its July 2022 investor letter:

“We are short shares of Paycom Software, Inc. (NYSE:PAYC), a $19 billion SaaS-based payroll services company that has been one of the best performing large capitalization software stocks since it went public in 2014. Even after the market turmoil of this year, Paycom trades at more than 70x the consensus estimate for this year’s free cash flow, a testament to the fact that, while unprofitable tech companies and temporary pandemic winners have been justly punished in the markets, there’s still plenty of froth left in allegedly higher quality fare. Paycom’s valuation, in particular, doesn’t come close to reflecting the near term headwinds of slowing employment growth, meaningful TAM saturation, and increasing competitive intensity.

Paycom’s steady and robust growth over the past decade has come by way of taking market share from payroll industry behemoths ADP and Paychex. Paycom has been accompanied in this quest by high-tech peers Paylocity (PCTY) and closely held BambooHR, and has been buttressed by secular job growth trends in the US small and medium business sector. But Paycom is no longer a $100 million annual revenue upstart, and neither are its peers. At $1.4 billion of run-rate recurring revenue, the company is a scaled business, and combined with Paylocity, Bamboo, and other dynamic tech companies in the sector, the group’s share of the SME payroll market is north of 40%. That’s a lot more than the blue-sky implications of Paycom’s 5% market share claim, and it means that further market share gains will be a lot more difficult going forward.

At the same time, ADP is fighting back, increasing its customer retention rate and growing its employee rolls. Rippling and Gusto, two rapidly growing startups in the space, have also recently raised capital at $10-billion-plus valuations, and are actively fighting for market share. All this means that the competition faced by Paycom is about to get a lot tougher. If that weren’t enough, US employment growth looks to be decelerating at a fairly significant clip, which means that all the payroll players will be fighting in a smaller field. For a SaaS company with an astronomical valuation like Paycom’s, price cutting is probably not something investors are accustomed to thinking about, but they might soon have to…” (Click here to read the full text)

10. Waste Connections, Inc. (NYSE:WCN)

Motley Fool Asset Management’s Stake Value: $17,309,000

Percentage of Motley Fool Asset Management’s 13F Portfolio: 1.62%

Number of Hedge Fund Holders: 34

Waste Connections, Inc. (NYSE:WCN) is a leading North American waste management company. On August 2, Waste Connections, Inc. (NYSE:WCN) raised its fiscal 2022 revenue view to $7.125 billion, well above Wall Street consensus which sits at $4.8 billion. At the end of Q2 2022, 34 hedge funds disclosed ownership of stakes in Waste Connections, Inc. (NYSE:WCN). The total value of these stakes amounted to $1.07 billion.

This August, BMO Capital analyst Devin Dodge raised his price target on Waste Connections, Inc. (NYSE:WCN) to $151 from $143 and maintained a buy-side Outperform rating on the shares. On August 9, Deutsche Bank analyst Kyle White raised his price target on Waste Connections, Inc. (NYSE:WCN) to $154 from $145 and reiterated a Buy rating on the shares. On October 6, Stifel analyst Michael Hoffman maintained his Buy rating on Waste Connections, Inc. (NYSE:WCN).

As of June 30, Motley Fool Asset Management owns more than 138,000 shares of Waste Connections, Inc. (NYSE:WCN). The fund’s stakes are valued at $17.3 million and the investment covers 1.62% of the fund’s 13F portfolio. The stock is one of the best Motley Fool stocks to buy now.

Some of the top stocks that Motley Fool Asset Management has hefty stakes in include Alphabet Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT).

9. Atlassian Corporation Plc (NASDAQ:TEAM)

Motley Fool Asset Management’s Stake Value: $17,548,000

Percentage of Motley Fool Asset Management’s 13F Portfolio: 1.65%

Number of Hedge Fund Holders: 66

Atlassian Corporation Plc (NASDAQ:TEAM) is a cloud-computing company best known for its Jira software products. Atlassian Corporation Plc (NASDAQ:TEAM) is a cash-rich company to invest in. The company has free cash flows of $808.8 million. Atlassian Corporation Plc (NASDAQ:TEAM) is one of the best Motley Fool stocks to buy now.

Wall Street sees upside to the cloud space and specifically Atlassian Corporation Plc (NASDAQ:TEAM). On August 12, Bernstein analyst Peter Weed raised his price target on Atlassian Corporation (NASDAQ:TEAM) to $263 and maintained a buy-side Outperform rating on the shares. This September, Mizuho analyst Gregg Moskowitz maintained his Buy rating and $360 price target on Atlassian Corporation Plc (NASDAQ:TEAM).

At the end of the second quarter of 2022, 66 hedge funds held stakes in Atlassian Corporation Plc (NASDAQ:TEAM). The total value of these stakes amounted to $3.49 billion. Of those, $17.5 million were of Motley Fool Asset Management. The investment covers 1.65% of the fund’s 13F portfolio.

Here is what Artisan Partners had to say about Atlassian Corporation Plc (NASDAQ:TEAM) in its second-quarter 2022 investor letter:

“Atlassian Corporation Plc (NASDAQ:TEAM) is a leading provider of innovative, customizable team-collaboration software tools for over 200,000 customers. Despite positive fundamental momentum—the company recently reported 30% revenue growth and 28% trailing twelve months FCF margins—shares traded lower during Q2 as investors rotated out of high-growth stocks with elevated multiples. The company’s highly efficient sales and marketing capability, combined with substantial R&D investment, points to sustained long-term revenue and FCF growth. Meanwhile, we recognize a recession would likely have an impact on Atlassian via slowing growth metrics. However, we believe its low priced, mission critical cloud tools would prove relatively resilient in this scenario. For these reasons and shares trading at a very attractive valuation for a business with highly recurring revenues, strong revenue growth prospects and attractive margins, we added to our position.”

8. SBA Communications Corporation (NASDAQ:SBAC)

Motley Fool Asset Management’s Stake Value: $23,551,000

Percentage of Motley Fool Asset Management’s 13F Portfolio: 2.21%

Number of Hedge Fund Holders: 36

SBA Communications Corporation (NASDAQ:SBAC) is a specialized REIT that owns and operates wireless communications infrastructure primarily in North America, Central America, and South America. The company is profitable and has solid free cash flows that help it award shareholders with dividends. As of October 7, the stock is offering a forward dividend yield of 1.08% and has free cash flows of over $1 billion. The company has a trailing twelve-month operating margin of 36.52%. SBA Communications Corporation (NASDAQ:SBAC) is ranked high on Motley Fool Asset Management’s 13F portfolio and is one of the best Motley Fool stocks to buy now.

On August 26, Barclays analyst Tim Long revised his price target on SBA Communications Corporation (NASDAQ:SBAC) to $380 from $385 and reiterated a buy-side Overweight rating on the shares.

At the close of Q2 2022, 36 hedge funds were long SBA Communications Corporation (NASDAQ:SBAC) and held stakes worth $614.5 million. As of June 30, Motley Fool Asset Management’s stakes in SBA Communications Corporation (NASDAQ:SBAC) sit at $23.5 million. The investment covers 2.21% of the fund’s 13F portfolio.

Here is what Baron Funds had to say about SBA Communications Corporation (NASDAQ:SBAC) in its second-quarter 2022 investor letter:

“During the second quarter, we took advantage of the broader market dislocation and indiscriminate selling to increase the Fund’s exposure to wireless tower REITs at what we believe were attractive valuation levels. In June, we re-initiated a position in fellow tower operator, SBA Communications Corp.

We are optimistic on the long-term prospects for wireless cell towers for the following reasons.

Secular Growth Drivers:

Mobile Data Growth: The average smartphone user in the U.S. consumed approximately 3.5 megabytes (“MB”) of data per month in 2016. Today, that same user consumes 20 to 25 MB per month with the proliferation of data intensive applications such as video streaming and gaming. Within five years, industry estimates expect this number to be over 50 MB per month. With the addition of connected smart devices, overall mobile data growth is expected to grow 25% per year over the next five years…” (Click here to see the full text)

7. Axon Enterprise, Inc. (NASDAQ:AXON)

Motley Fool Asset Management’s Stake Value: $24,112,000

Percentage of Motley Fool Asset Management’s 13F Portfolio: 2.26%

Number of Hedge Fund Holders: 26

Axon Enterprise, Inc. (NASDAQ:AXON) is a leading designer and manufacturer of technology and weaponry for military and law enforcement, as well as consumers. The company has two business divisions: TASER, and Software & Sensors. On September 7, Axon Enterprise, Inc. (NASDAQ:AXON) announced that Wellstar Health is equipping hospital security officers with de-escalation tools and training including the company’s TASER 7 energy devices.

Wall Street is bullish on Axon Enterprise, Inc. (NASDAQ:AXON). This August, Baird analyst William Power raised his price target on Axon Enterprise, Inc. (NASDAQ:AXON) to $150 from $130 and maintained a buy-side Outperform rating on the shares. On September 15, Barclays analyst Tim Long started coverage of Axon Enterprise, Inc. (NASDAQ:AXON) with a buy-side Overweight rating and his $147 price target.

At the end of Q2 2022, 26 hedge funds disclosed ownership of stakes in Axon Enterprise, Inc. (NASDAQ:AXON). The total stakes of these hedge funds amounted to $227.5 million. As of June 30, Motley Fool Asset Management owns more than 250,000 shares of Axon Enterprise, Inc. (NASDAQ:AXON) and has a stake worth $24 million in the company. The stock is one of the best Motley Fool stocks to buy now.

Here is what Baron Funds had to say about Axon Enterprise, Inc. (NYSE:AXON) in its first-quarter 2022 investor letter:

“Axon Enterprise, Inc. (NYSE:AXON) is a public safety-oriented company that sells its products to governments and law enforcement agencies around the world. Its mission is to “…make the bullet obsolete” using non-lethal TASER® devices combined with digital cameras, cloud-based software, and virtual reality training. This array of technology aims to provide better relationships between law enforcement and its constituent communities, and to reduce fatal outcomes dramatically when stressful confrontations occur. Axon takes its mission seriously and has an extensive ethics committee that includes members of law enforcement and activist communities. Axon claims that with usage of body cameras, complaints against police departments are down 88% and use of force is down 58%. We believe the company is a premier part of the solution to prevent bad actors in law enforcement and the mistrust that has resulted from those bad actors.

The company has three major product lines: first, high-definition cameras (sensor division) worn on the body or mounted on vehicles (newer products incorporate live streaming and automated license plate readers); second, subscription-based digital evidence software (evidence.com) that stores body camera and third-party video allowing for evidentiary chain of custody, search, and report writing (officer court time reduced by 70%); and third, non-lethal TASER devices (that can temporarily incapacitate dangerous and violent actors using an electrical shock) that save lives by avoiding discharging firearms (the company claims 258,000 lives have been saved so far). When used in combination, its cameras provide GPS officer location and live streaming, while its software can provide real-time operations mapping of active situations. In the future, Axon seeks to add consumer safety products (launching in 2022) that will automatically notify 911 if deployed, drone-based camera products, more VR training, and additional cloud-based software, including evidence software usable by prosecutors and defense attorneys, which could be a $1 billion market on its own.

From a financial perspective, the company is really built upon recurring revenue – it is not a one-time device sales company. Software made up 28.5% of 2021 revenues. And while hardware made up 43% of 2021 sales, about two-thirds of that is now bundled under long-term deals, so really only about 15% of the company’s total revenue is one time in nature. The remaining 27% of sales is warranty and cartridge consumables, which are largely recurring as well. As software grows as a proportion of revenue (to what we believe will be over 40% by 2026), margins should expand. We believe that EBITDA margins can expand from 20% in 2021 to nearly 30% by 2026. Revenue growth, which was nearly 27% in 2021, should continue at over 20%, given that the company is less than 2% penetrated into its $52 billion addressable market. Finally, the company has over $400 million of cash and no debt on its balance sheet. When combined with its significant free cash flow (about 75% of EBITDA converts to free cash flow), Axon has significant capital to grow its business, complete accretive acquisitions, and potentially return capital to shareholders.”

6. Mastercard Incorporated (NYSE:MA)

Motley Fool Asset Management’s Stake Value: $32,694,000

Percentage of Motley Fool Asset Management’s 13F Portfolio: 3.07%

Number of Hedge Fund Holders: 137

On September 19, Mastercard Incorporated (NYSE:MA) declared a quarterly cash dividend of $0.49 per share of common stock. The dividend is payable on November 9 to investors of record at the close of business on October 7. As of October 7, the stock is offering a forward dividend yield of 0.66%. Mastercard Incorporated (NYSE:MA) has a trailing twelve-month operating margin of 56.7% and is one of the best Motley Fool stocks to buy now that is profitable and pays dividends.

On August 1, BMO Capital analyst James Fotheringham raised his price target on Mastercard Incorporated (NYSE:MA) to $422 from $402 and reiterated a buy-side Outperform rating on the shares. The analyst recommends the stock as his core long-term pick. On September 2, Deutsche Bank analyst Bryan Keane reiterated a Buy rating and his $440 price target on MasterCard Incorporated (NYSE:MA).

At the close of Q2 2022, 137 hedge funds were long Mastercard Incorporated (NYSE:MA) and held stakes worth $14.99 billion in the company. As of June 30, Motley Fool Asset Management’s stake in the company is valued at $32.69 million. The investment covers 3.07% of the fund’s 13F portfolio.

Here is what Baron Funds had to say about Mastercard Incorporated (NYSE:MA) in its second-quarter 2022 investor letter:

“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Mastercard Incorporated (NYSE:MA) added the most value. These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”

In addition to Mastercard Incorporated (NYSE:MA), other highly profitable stocks among Motley Fool Asset Management’s top holdings include Alphabet Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT).

Click to continue reading and see 5 Best Motley Fool Stocks To Buy Now.