3 growth stocks new investors should own for 2023
If you were a new investor in 2022, it was definitely tough. After years of positive annual returns, 2022 has been much different. The Nasdaq Compound The index has fallen nearly 27% since the start of the year, and it has fallen as much as 34% at times this year.
However, these lower prices can be gifts for new long-term investors. Some stocks haven’t been this cheap in years, offering incredible opportunities to buy blue chip companies at a discount. Airbnb (ABNB 1.91%), PubMatic (PUBM -0.35%)and MercadoLibre (MELI 5.72%) could be some of these stocks.
The most important aspect for new investors when building a portfolio is to create a base of safe stocks. However, if you’ve done that and are looking to add higher growth companies, you might want to consider these three companies.
The common saying is that new investors should invest in what they know, and Airbnb could be a good start. If you have booked a stay on Airbnb or hosted your accommodation on the platform, you know the company well. You’re not alone. In the third quarter, nearly 100 million nights and experiences were booked on Airbnb, and 4 million people are hosts on the platform.
Not only is Airbnb one of the best platforms, but it also has some of the best customer satisfaction ratings in this space. Airbnb’s main rival, Vrbo (owned by Expedia Group), has a Net Promoter Score -83 on a scale of 100 to -100. Comparatively, Airbnb has a score of 29. It’s clear that Airbnb customers are much more satisfied with the company’s offering than Vrbo, and that’s likely because Airbnb continues to innovate and roll out new new products to make the customer experience painless.
The most recent innovation was to eliminate an important issue that consumers were angry about: non-transparent pricing. Users can now see the total price when booking a stay on Airbnb instead of receiving various fees and taxes added near the purchase. And with over $3.3 billion in free cash flow over the last 12 months, these innovations are unlikely to stop.
Airbnb has positioned itself well to thrive over the long term and gain market share in the travel space, and investors can get this business relatively cheaply. The shares are trading at 21 times free cash flow – nearly the lowest valuation since its IPO in late 2020.
As a new investor, you may want to invest in some long-term emerging trends. Digital advertising is one such space. Global digital advertising spending is expected to reach $627 billion by 2024, a 43% increase over 2021 spending.
PubMatic operates in this space, and it is one of the leading platforms helping publishers sell their open digital advertising inventory. At the end of 2021, the company held around 3% to 4% market share in this industry. Despite the deteriorating macro environment, the company has continued to outpace broader industry expansion, so PubMatic’s share may continue to grow over time.
The company is gaining prominence in this lucrative field, but investors haven’t caught on yet. The shares are trading at an advantageous valuation of just 20 times earnings, well below rivals like magnite. With today’s valuation, investors may not anticipate the adoption PubMatic could have in store long term, making it a potentially wonderful investment in a diversified portfolio.
E-commerce actions have taken a hit this year because US and European consumers have cut spending on discretionary items like those sold on e-commerce platforms. However, the Latin American e-commerce powerhouse MercadoLibre barely saw a blip. Its revenue grew 61% year-over-year in the third quarter to $2.7 billion, which is just a light down from the company’s expansion rates over the past year.
Not only that, but the company’s cash generation has remained very strong. The company’s trailing 12-month free cash flow generation increased 350% from the prior year period to $1.6 billion.
Indeed, the e-commerce market in Latin America is growing much faster than the global e-commerce industry. Retail e-commerce sales expansion in 2022 is expected to be over 20% in Latin America, while the global average is only expected to grow by 12%, according to eMarketer.
Consequently, the e-commerce industry in Latin America remains stable in this dangerous economic environment, while other regions suffer.
Latin America can be a risky place to invest, but MercadoLibre’s leadership in the region offers some stability. The company controls 21% of the e-commerce market in Latin America, according to Statista. With this balance between stability and growth potential, MercadoLibre could be a wonderful long term investment for new investors.