Temperatures are warming up. And after months of steep declines, stocks could also be heating up. Consecutive trading days of gains isn’t exactly a compelling reversal, but let’s be optimistic. There are plenty of great growth titles that have been beaten, and the best ones should bounce back with a vengeance when the time comes.
Airbnb (ABNB 5.96%) and Zim Integrated Shipping Services (ZIM 1.47%) are two stocks that I think are ready to take off this summer. Let’s see why these are the best hot stocks to buy in June.
1.Airbnb
After two years at home, people are ready to start traveling again. Airbnb is in pole position to take advantage of the country’s awakening. Sure, gas prices are high — and that’s going to eat away at travel plans across the country. The pressures of the recession are in the air – and it’s a buffet on your disposable income.
None of this will stop the Airbnb revolution. With the easing of travel restrictions around the world, the world is yours. Airbnb sells the pearls.
Investors can get away with hoteliers, airlines and cruise lines, but Airbnb is part of the new way to travel. It is a travel destination for renters. It’s a true cottage industry for the owners behind the 6 million active listings On the platform. Revenue soared 70% in its latest quarter, and its leak revenue is already 38% of what it was in 2019. Airbnb has already recovered from the COVID-19 crisis, but the stock is trading for less than half of its peak shortly after its initial public offering (IPO) last year. The potential is exorbitant when everything starts to fall into place.
2. Zim Integrated Shipping Services
You may not see shipping as a growth industry, but Zim ticks a lot of boxes for growth and income investors. It’s no surprise that Zim himself is growing up right now. Companies pay a premium to move goods, and this Israeli company is taking advantage of high demand at high shipping rates. Revenue jumped 113% in its latest quarter, fueled mainly by the doubling of its average freight rate.
The net result is growing even faster. Net income nearly tripled, up 190% to $1.7 billion on revenue of $3.7 billion. Those are pretty juicy margins if you work the math, and Zim is all about sharing the wealth. It pays 20% of its net income to investors as a quarterly dividend. It then distributes 30% to 50% of its annual profit as a special distribution. Add up the dividends he’s paid out over the past 12 months, and that translates to a return of over 47%.
It’s not sustainable. Profit margins will stabilize at this point, and this is also a cyclical industry. It’s also worth pointing out that as an Israeli company, 25% of distributions go back to the country of origin as a withholding tax. But it’s still a cheap stock that generates monster growth.
It also helps that Zim isn’t a heavy shipping company. It is an agile and lean operation, which emphasizes innovation and digitization in an industry that often lives in the past. Investors spooked by leveraged companies in this rising rate climate should take comfort in knowing that Zim’s balance sheet shows positive net cash. It has also invested a good portion of the cash it retains in multiple charter deals to expand its fleet with liquefied natural gas-powered vessels. Transportation inventory are cyclical, but Zim has been a star of the forgotten class of 2021 IPOs, having more than tripled since its market debut at $15 a share.
Rick Munarriz has positions with ZIM Integrated Shipping Services Ltd. The Motley Fool has posts and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.
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