Day trading is often portrayed in a glamorous light, but the reality is much less appealing. According to a recent study, just 3% of day traders are profitable during an average year, and a mere 1.1% make more than minimum wage. So, if you want to build life-changing wealth, the first thing you'll need is a long-term mindset. A buy and hold strategy blunts the impact of transient market volatility, and it also means you pay less in taxes because short-term capital gains are taxed more aggressively.
Of course, you will also need a diversified portfolio of high-quality stocks, and that's the tricky part. There's no magic formula to identify smart investments, but I typically start by looking for companies with three qualities: a competitive advantage, strong revenue growth, and a whopping market opportunity. For instance, Airbnb (ABNB 1.65%) and Intuit (INTU +2.75%) check all three boxes, and both look like the building blocks of a market-beating portfolio.
Image source: Airbnb.
1. Airbnb
Airbnb is disrupting travel and tourism, an industry that represented 10% of the global economy prior to the pandemic. Airbnb connects 4 million hosts with potential guests, helping travelers find unique lodgings in 100,000 global cities. Likewise, its platform also links travelers with experiences in over 1,000 cities -- everything from hidden jazz clubs in London to maple syrup tasting in Vermont.
Last year, social distancing brought travel to a standstill, and the industry is still in the early stages of recovery. But the pandemic is likely to have a lasting impact, and Airbnb is well-positioned to capitalize. Remote work has made people more flexible, meaning they can travel anytime. To address demand, Airbnb introduced flexible search parameters, allowing users to search within a range of dates, prices, and destinations.
Airbnb also made it easier for hosts to join the platform, offering artificial intelligence (AI)-powered tools to improve photo arrangement and text descriptions. Those moves highlight another key advantage: Onboarding a new host is much easier (and cheaper) than building a new hotel. That makes Airbnb's business model more dynamic and resilient, which has translated into strong sales growth over the past year.
|
Metric |
Q3 2020 |
Q3 2021 |
Change |
|---|---|---|---|
|
Revenue (TTM) |
$3.6 billion |
$5.3 billion |
47% |
Source: YCharts. TTM = trailing-12-months.
The future looks even brighter for this disruptive tech company. Management puts its market opportunity at $3.4 trillion, which includes short-term stays, long-term stays, and experiences. During a recent earnings call, CEO Brian Chesky said, "We expect a travel rebound unlike anything we have seen before." That's why this unstoppable stock looks like a smart buy right now.
2. Intuit
It's almost tax season. For many consumers, that means it's nearly time to fire up Intuit's TurboTax, a product that commands a 73% market share, making it the most popular tax preparation software by a wide margin. While TurboTax is the company's best-known product, it's just a small part of Intuit's portfolio.
QuickBooks has become the gold standard in accounting software, helping self-employed individuals and small- and medium-sized businesses (SMBs) track expenses, accept payments, and manage employee payroll. Here again, Intuit has established itself as the industry leader, as it currently holds a 77% market share in the U.S.
Last year, Intuit paid $8.1 billion in cash and stock to bring another well-known brand under its umbrella: Credit Karma. That platform leans on artificial intelligence to pair consumers with financial products like credit cards, loans, and insurance. Moreover, the acquisition creates synergies with TurboTax, as consumers can have their tax refunds deposited directly in high-yield savings accounts through Credit Karma.
Intuit's lineup of industry-leading brands has made it a financial powerhouse, and the company has delivered strong revenue growth over the past year.
|
Metric |
Q3 2020 |
Q3 2021 |
Change |
|---|---|---|---|
|
Revenue (TTM) |
$7.8 billion |
$10.3 billion |
32% |
Source: YCharts. TTM = trailing-12-months.
Intuit also recently acquired Mailchimp, a platform that helps SMB owners build digital storefronts, launch targeted marketing campaigns, and manage customer relationships. The acquisition had a hefty $12 billion price tag (paid in cash and stock), but it looks like a brilliant move. Mailchimp's portfolio complements the QuickBook's platform, enhancing Intuit's value proposition to SMBs and adding $30 billion to its addressable market.
As a whole, management puts its market opportunity at $260 billion, a figure that includes TurboTax, QuickBooks, Mailchimp, and Credit Karma in both domestic and international markets (i.e. U.S., UK, Canada, and Australia). In short, Intuit has plenty of room to grow, and given its ironclad competitive position, I think this tech stock looks unstoppable in years ahead.
