As the pandemic subsides and the world enters a new normal, investors are on the lookout for stocks that can continue to post steady growth. The plunge in valuations for technology stocks on the Nasdaq may have unnerved many, but that's precisely how you can find great bargains. With share prices and valuations being much more palatable now, it's the perfect time to hunt for stocks on the cheap.
That said, it's important to ensure you pick companies that have the characteristics to compound your money for years or even decades. Such businesses should have a strong competitive moat, latch on to sustainable trends, and leverage their brand to accelerate their growth momentum. These characteristics are key to finding long-term winners that can help to grow your portfolio's value over time.
Here are two stocks that possess the attributes above that you can include in your investment portfolio over the next decade.
1. Etsy
E-commerce has been booming in the years leading up the pandemic, and one of the beneficiaries of this trend has been Etsy (ETSY 0.49%). The company, which runs an e-commerce platform specializing in unique and handcrafted items, has seen its gross merchandise sales (GMS) rise from $4.9 billion in the fiscal year 2019 (FY2019) to $13.5 billion in FY2021. Revenue has more than doubled over the same period to $2.3 billion, while net income has surged more than fivefold from $95.9 million to $493.5 million.
Etsy's platform has also seen an influx of both buyers and sellers as more influencers post their customized collections for sales. Its active buyer base has more than doubled from 46.4 million in FY2019 to 96.3 million in FY2021, while the number of sellers has nearly tripled over the last two years. However, the company's growth rate has moderated after its pandemic-fueled surge. Etsy's financial guidance for the first quarter of 2022 is for a GMS of $3.3 billion and revenue of $577.5 million, a year-over-year increase of 6.5% and 4.9%, respectively. Regardless, CEO Josh Silverman believes that Etsy still has a long growth runway with a $2 trillion total addressable market for the company's various categories.
Etsy is raising its marketplace transaction fee from 5% to 6.5% on April 11, which should add to its revenue and bottom line. The additional fees will be spent on marketing strategies to raise awareness of the company's unique proposition and to engage more people through social media and digital advertisements. Such spending has yielded great results before and should continue to do so -- repeat buyers for FY2021 shot up by 121% since FY2019 to 36.3 million while habitual buyers more than tripled over the same period to 8.1 million.
Image source: Getty images.
2. Lululemon Athletica
The world is pivoting toward a healthier lifestyle as people exercise more, and Lululemon Athletica (LULU -1.26%) is a big beneficiary of this rising trend. The company sells a wide variety of high-performance athletic apparel that has been warmly embraced by a growing population of people who are focused on exercise. The "athleisure" trend (i.e., athletic pursuits combined with leisure) is also gaining momentum and is contributing to the rising demand for Lululemon's stylishly designed products.
The company's robust numbers demonstrate its rapid growth since FY2019. Net revenue has increased from $2.5 billion in the first nine months of 2019 (9M2019) to $4.1 billion in 9M2021, while operating income rose by 57.2% over the same period. Net income jumped from $347.5 million to $540.8 million in 9M2021. Lululemon has successfully tapped its e-commerce platform to sell its products through the pandemic, and revenue from this channel made up 40% of total revenue and experienced a 54% per annum growth rate since FY2019.
Lululemon has also steadily increased its number of stores over the last few quarters, moving from 515 at the end of the third quarter of FY2020 to 552 as of October 31, 2021. The company announced just this month that it is entering the footwear category, challenging the dominance of footwear brands such as Nike (NKE -0.74%) and Under Armour (UAA -2.34%). It will debut its first-ever running shoe called Blissfeel and introduce a total of four new women's shoe designs. Using the same science as its apparel to design these shoes, Lululemon will debut its men's footwear collection in 2023. These launches promise to open up yet another revenue stream for the innovative athleisure company that can propel its top and bottom lines ahead for many years to come.
