The stock market is holding steady bear market territory as we approach 2023. No one is quite sure what lies ahead for the year ahead, but those with the cash to invest should take advantage of today’s lowest prices. If you’re looking to make your money grow, here are two simple stocks I’d buy with $1,000 before the end of 2022.
1. Airbnb has huge long-term growth potential
Performance is important when evaluating a growth stock, but the company’s vision and business model are just as important. Airbnb (ABNB 1.91%) ticks both of these boxes, giving it fantastic long-term growth potential.
The website’s nearly 4 million hosts have welcomed more than a billion guests worldwide since its humble beginnings in 2007. Unprecedented travel demand in recent years has helped the company consistently exceed his income estimates. The third quarter of 2022 was the company’s most profitable quarter to date. Bookings increased by 25% and free cash flow increased by 48%.
Many experts believe that demand for Airbnb stays should start to slow amid the current economic uncertainty. However, I believe there are many opportunities for continued growth. Airbnb recently introduced apartment sharing, which allows some cooperating apartment operators in certain cities to allow tenants to rent out rooms to help offset rising housing costs. It also sees more ads each year. There were 15% more enrollments in the third quarter of 2022 compared to the previous year.
I also personally believe in Airbnb’s vision. The company has completely revolutionized the travel industry with its idea of short-term rentals and has become the preferred method for many when traveling. Other companies like Expediais VRBO and Vacasa have followed suit, offering their own take on the service. But they don’t compare to Airbnb in size or scale.
Airbnb is also profitable, something many others high growth stocks can’t say now. The stock was beaten this year, impacted by general market volatility but also by growing concerns about the impact of a recession on travel spending. Although a recession would likely negatively affect the company in the short term, it is well positioned to weather these challenges.
The shares trade at around 40 times earnings, which is a bit pricey compared to its hosting counterparts, but it’s still the most favorable evaluation since its IPO in 2021.
2. Costco is safe play for an uncertain economy
Wholesale Costco (COST 0.58%) may not offer as many growth opportunities as Airbnb given that the stock has already been listed on the stock exchange for 37 years and achieved stellar growth during that time. But it’s still a valid buy for growth investors, especially at the current price.
The upmarket warehouse operator, known for its bargain prices and bulk merchandise, has become the country’s third-largest retailer. Its membership-based business model helps it pass on savings to its customers while achieving healthy growth for shareholders.
It’s also a fantastic game if you’re worried about the economy for the coming year. There is a lot of talk of a recession in 2023, which would negatively impact most retailers. But Costco is not like most. For starters, it offers low prices for countless products. You also need an annual subscription to shop in stores, which promotes customer loyalty.
The company doesn’t hold tons of inventory like other retailers. Its bulk purchases from selected partners as well as its iconic Kirkland products are purchased in limited quantities. This allows it to offer new products to its customers without compromising high inventory levels, which eat away at retailers’ profit margins.
From the company latest sales results – for the month ended November – were strong although they slightly missed analysts’ forecasts. Sales have increased, as has earnings per share year over year, but a big boost could come in 2023 as it plans to increase your contributions to help improve its operating margin, which is highly dependent on member revenue.
The stock is down 14% this year, meaning it trades around 34 times its forward price-to-earnings ratio. Much like Airbnb, it’s a slight premium over competitors, but its past performance warrants a premium. The stock provided twice the total return of the S&P500 over the past 25 years. And there is reason to believe that healthy growth could continue over the next 20 years.
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