2 smart growth stocks to buy in September

As an individual investor, you probably don’t have access to the same resources as institutional asset managers. You don’t have millions of dollars at your disposal and you don’t employ teams of analysts who can do field research. But it is okay! You still have an advantage: a long-term mindset.

In other words, you can buy and own shares of high quality companies without worrying about quarterly performance targets. But in order to maximize this benefit, it’s important to add to your portfolio regularly – once a month, or even once a week. This helps reduce the impact of short-term market volatility on your total returns.

With that in mind, here are two smart growth stocks to buy in September.

Image source: Airbnb.

1. Airbnb: the future of travel

Airbnb (NASDAQ: ABNB) disrupts the travel and tourism industry. Its platform connects 4 million hosts with potential customers around the world, offering much more flexibility and privacy than traditional hotel chains. Additionally, Airbnb has grown beyond homes, helping people find authentic experiences in 1,000 cities around the world.

In the wake of the pandemic, the travel industry is changing and Airbnb is ready. Remote working has made people more flexible about when and where to go, and more and more travelers are opting for unique experiences over typical tourist attractions. Indeed, searches for unique homes on Airbnb are up 94% this year compared to 2019.

In particular, this trend affects one of the main advantages of the company. Customers can find over 170,000 unique listings on the platform, from a treehouse in the Hawaiian rainforests to a tiny house in the Italian Alps. You can even stay in a castle in the English countryside. No traditional hotel chain can offer such diverse experiences.

But that’s not the only change; customers also visit more distant destinations. So far this year, 22% of nights booked on Airbnb have been for rural stays, but that figure was less than 10% in 2015. This highlights another advantage of Airbnb’s business model. Its platform has listings in places where traditional hotels wouldn’t make financial sense; that’s because Airbnb’s inventory is more dynamic – it’s much easier to onboard a new host than it is to build a new hotel.

Here’s the big picture: After spending more than a year living under restrictions linked to a pandemic, many people are ready to travel again. In fact, CEO Brian Chesky recently said, “We expect a rebound in travel like we’ve never seen before.” In the second quarter, Airbnb reported revenue of $ 1.3 billion, up 299% from the previous year. And gross bookings reached $ 13.4 billion, up 320%, indicating strong demand in the coming quarters. That is why now seems like a good time to buy this stock.

A pen pointing at an uptrend bar chart.

Image source: Getty Images.

2. Zscaler: the new corporate network

Zscaler (NASDAQ: ZS) specializing in cybersecurity. The Enterprise Secure Access Service Edge (SASE) is designed to replace outdated corporate networks, allowing employees to quickly and securely connect to corporate resources from any device or site. Zscaler also relies on artificial intelligence to improve threat detection, which means its platform becomes more efficient over time.

Unlike traditional castle and moat networks, where companies kept resources onsite and built firewalls around the perimeter of the business, Zscaler’s solution is delivered from the cloud. The benefits here are twofold: First, its SASE platform is spread across 150 global data centers, providing more capacity (i.e. better performance) than most customers could achieve on their own. And second, it eliminates the need to purchase and maintain expensive equipment on-site. In short, Zscaler improves and simplifies zero trust security.

For this purpose, the research company Gartner recognized Zscaler as the dominant force in this industry for 10 consecutive years, demonstrating his best solution. And as more businesses embrace remote working in the cloud, SASE solutions are becoming more and more mainstream. In fact, Gartner estimates that 40% of companies will have plans in place to adopt SASE by 2024, up from just 1% in 2018.

Unsurprisingly, this dynamic has resulted in strong growth in turnover.

Metric

Q3 2018 (TTM)

Q3 2021 (TTM)

TCCA

Returned

$ 170.5 million

$ 601.9 million

52%

Data source: YCharts. TTM = 12 rolling months. CAGR = compound annual growth rate. Note: Q3 2021 ended April 30, 2021.

Notably, Zscaler’s retention rate has tended to increase over time, from 115% in 2017 to 126% in the most recent quarter. In other words, customers are spending more each year, which is a testament to the stickiness of Zscaler’s product.

For the future, the company has sufficient leeway to develop its activity. Management assesses the market opportunity at $ 72 billion, more than 100 times Zscaler’s revenue in the past 12 months, and the company’s best solution is expected to drive demand in the coming quarters. That’s why this growth stock looks like a smart long-term investment.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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