Successful investing is partly just a waiting game. That's why investing in an index fund is such an effective way of growing your money. As the value of the market grows over time, so will your shares.
However, investing some of your money in individual stocks gives you the opportunity to see higher gains. Creating a well-rounded portfolio of growth stocks and value stocks puts your money in the best position to grow safely. And if you hold on for the next 20 years, you're likely to be rewarded.
Airbnb (ABNB 2.51%), Etsy (ETSY 1.72%), and Home Depot (HD -0.53%) are three stocks I'd buy and hold for the next 20 years.
1. Airbnb: Because travel is changing
Travel has more or less been the same for decades or longer. Back in the day, it was the roadside inn, and that morphed into the more sophisticated hotel business. Airbnb has shaken that up with its vacation rental platform, and it's embracing the societal shift toward hybrid living.
Image source: Airbnb.
2020 was one of the worst years for the company, but it rebounded last year to one of its best. That's pretty impressive considering that travel is still restricted, and it demonstrates how much potential the company has. It uses the word "adaptability" pretty frequently, and that's certainly been a huge element of its success. It can go wherever its users do, a reversal from traditional travel. Travelers used to only be able to go where hotels were -- Airbnb changed that.
The 2021 fourth quarter was an appropriate finale to its comeback year. Revenue increased 78% year over year to $1.5 billion, and gross booking value increased 91%. Even better, it posted record net income of $55 million. Close to half of nights booked were for a week or longer, and 20% were for a month or longer. The company is moving fast to address these trends, releasing a winter upgrade and sponsoring CEO Brian Chesky to live in Airbnb rentals this year to get a hands-on experience.
This adaptability is what makes Airbnb so compelling as an investment. Yesterday, it was cheaper than hotel travel. Today, it's hybrid living. Tomorrow, it could be something else, and Airbnb is likely to be able to meet new demand. That's why investors can hold on to this stock for 20 years and expect high gains.
Airbnb trades at a high 129 times forward one-year earnings, but there's a premium because of the stock's excellent prospects.
2. Etsy: Because shopping is changing
E-commerce is past the disruptor stage, but winners are still taking spoils. Etsy is a niche e-commerce site that's moved into the mainstream and is picking up tons of new customers as it rakes in revenue and profits.
Etsy posted triple-digit revenue increases at the beginning of the pandemic as customers discovered its handmade masks, and as expected, growth has decelerated. But it's still strong, with revenue increasing 18% year over year in the third quarter. Gross merchandise sales for active buyers increased 20% year over year, and enthusiastic customers are a key to its future.
Etsy is growing in other ways as well, acquiring synergistic companies to widen its chances and solidify its place in e-commerce. Growth isn't likely to jump back to last year's stellar numbers, short of another global lockdown. But double-digit increases are definitely on the table. Management is making moves to keep it there, introducing new features for a smoother shopping experience, such as an upgraded mobile app and product finder.
It also does an excellent job homing in on what its customers like best and providing more and better. For example, its top-selling category is housewares and home furnishings, and it collaborates with designers and celebrities to offer exclusive product lines.
Management expects revenue to increase 10% year over year at the midpoint in the fourth quarter when it reports this week. Shares trade at a relatively cheap (for a growth stock) 41 times trailing-12-month earnings, and investors should expect to see this stock reward them over the next 20 years.
Image source: Getty Images.
3. Home Depot: Because some things don't change
With all of the industries being disrupted, some are less prone to drastic change. Home improvement is moving to digital, like most other industries. But by its nature, which means large, heavy objects and products that customers like to see and touch, it's always going to have a strong physical element.
If anything, Home Depot has taken the challenge and is disrupting itself, shielding it from potential interlopers. It was that initiative that several years ago disappointed investors, since heavy omnichannel investments took a chunk off the bottom line not too long before the pandemic started.
But with its physical investments and digital strength due to those investments, it was in an excellent position to serve its customers when they were social distancing and focusing on their homes. Now it's continuing to see the benefits.
Sales increased 10% year over year in the 2021 third quarter, and net income increased 20% to $4.1 billion, or $3.92 in earnings per share. The company continued to invest in its capabilities throughout the pandemic, such as opening three new distribution centers in Florida last year. These strategic investments should power higher sales for many years.
Home Depot announced that Ted Decker will become CEO starting March 1, taking over from Craig Menear. He's a company veteran who should keep up management's great work.
Home Depot also pays an above-average dividend that yields 1.87%, and shares trade at a low 23 times trailing-12-month earnings. This is a rock-solid value stock to hold for the next 20 years and beyond.
