In a market characterized by volatility, most investors have found their mettle tested more than usual lately. However, if you invest in quality companies with solid and sustainable growth potential, the short-term market should not prevent you from continuing to build your portfolio according to your long-term financial objectives.
If you have capital to put into the market right now, here are two monster stocks that could soar in the new year. But more importantly, they can enrich investors’ portfolios for years to come.
1.Airbnb
Airbnb (ABNB 4.77%) has made a name for itself in a busy travel industry thanks to the individuality and innovative qualities of its platform. The idea of living in an apartment for vacations or long-term trips did not originate with Airbnb. But it built on that model on a scale that enabled a prolonged and healthy recovery from the intense pandemic downturn, leaving many other travel companies in the dust.
One thing that makes Airbnb unique is that it has something for everyone. Whether you want to stay in a castle in Tuscany, a studio in New York or a cabin in the Smoky Mountains, there’s a place for you.
From a few nights to a few months at a time, travelers can choose the type of stay that suits them while enjoying apartment-style amenities they might not find in an average hotel. And with more and more people working remotely, they’re taking advantage of not being tied to any location for long periods of time.
The resumption of cross-border travel is an important growth element for Airbnb. But management also aims to capitalize on the broader societal changes of recent years, such as the rise of remote working, which are catalysts for sustainable growth.
All of this creates a variety of opportunities beyond traditional types of travel, and its business model could prove remarkably resilient in the event of a global recession.
The company is also well positioned financially against near-term headwinds. Airbnb set several records in the third quarter of 2022, reporting its most profitable quarter ever as well as the most quarterly revenue.
Revenue of $3 billion and net income of $1.2 billion represented increases of 30% and 46%, respectively, from the third quarter of 2021, and jumps of 70% and 260% from the third quarter of 2019. Meanwhile, the company had amassed a stockpile of cash and investments totaling approximately $10 billion at the end of the third quarter, aided by $966 million of free cash flow generated during the period.
Airbnb’s core business is incredibly compelling in today’s environment, for consumers with all types of travel needs and for hosts looking for extra income in an uncertain economy. The strength of this company, coupled with a continued recovery that outpaces many of its peers, holds promise for the long term. growth long after any recession is over.
2. Fluffy
Soft (CHWY -1.88%) is an online retailer of pet products, but pet food is only part of its overall business. The company sells thousands of products for all types of pets, as well as farm animals like horses, chickens, pigs and goats.
Despite a supply chain that remains in motion, Chewy has managed to avoid many of the problems facing large retailers today with its network of distribution centers, three of which are automated. The company also plans to build two more automated distribution centers over the next 12 to 18 months. These centers shorten processing and fulfillment times (and therefore wait times for consumers) while saving significant operating costs.
Already, about 30% of its orders are processed by these automated processing centers. Chewy has also expanded into other lucrative segments of the broader pet market, including healthcare.
The company has partnered with well-known names like Trupanion and Lemonade offer a variety of insurance options for pet owners. It has a telehealth service, which allows pet owners to connect with a veterinarian via chat or video call. And the company recently launched its first pet wellness brand, a line of supplements called Vibeful.
Chewy sells its own products as well as other brands, and pet owners can get medication through its online pharmacy.
The pet wellness area was a logical next step. During the third quarter earnings call, CEO Sumit Singh noted that over-the-counter pet health and wellness products alone account for a total addressable market of more than $2 billion.
Chewy is also constantly growing its income and is profitable. The company’s net sales jumped 15% year over year to $2.5 billion in the third quarter.
Its Autoship program is increasingly adopted by pet owners and represents more than 73% of net sales in the quarter. In total, Autoship’s third-quarter sales jumped nearly 20% year-over-year. And gross customer additions for the three-month period were up 9% from pre-pandemic levels in the third quarter of 2019, while growing 6% from the prior quarter.
Expenses are only expected to increase in the coming years as pet ownership increases. Chewy’s business, which serves virtually every pet owner’s need, stands to benefit from these long-term tailwinds, as do its shareholders.
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