Investors of nearly all asset classes have observed valuations falling precipitously. The Federal Reserve sparked the selling, indicating in late 2021 that it would begin raising interest rates. For the most part, interest rates and asset valuations have an inverse relationship, and this period of rising rates has been no exception.
The fall in prices has created an opportunity for long-term investors to buy the dip. Here are three stocks you can buy and hold for at least three years.
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1. Roblox
Roblox (RBLX +0.55%) is a pioneer of the metaverse, catering mainly to the younger population. Revenue and user acquisition exploded at the pandemic's onset as millions of kids spent more time at home. Parents felt better if their kids played with friends virtually rather than in close proximity.
RBLX Price to Free Cash Flow data by YCharts.
In addition to the Fed raising interest rates, Roblox's stock has crashed because of fears about user engagement as economies reopen. Already, it has shown signs of slowing growth, decreasing customer spending, and user losses from lucrative regions. That said, it has also shown signs of stabilizing losses. Moreover, the sell-off has the stock trading near its lowest price-to-free-cash- flow multiple.
2. Airbnb
Airbnb (ABNB +1.88%) saw its revenue fall as worldwide travel demand dramatically slowed due to the outbreak. Understandably, folks were hesitant to spend time around others. Fortunately, several effective vaccines have been developed against COVID-19, and billions of doses have been administered. That's giving folks the confidence to take those trips that they paused during the initial stages of the pandemic.
ABNB Price to Free Cash Flow data by YCharts.
Indeed, after falling by 30% in 2020, Airbnb's revenue bounced back by 77% in 2021. Meanwhile, overall spending on hotels and resorts is far from recovering to 2019 levels, highlighting plenty of room for Airbnb's revenue to increase. Regardless, Airbnb's stock has been caught up in the broad market sell-off and is trading near its lowest price-to-free-cash-flow ratio.
3. Pinterest
Pinterest (PINS +1.44%) was yet another beneficiary of the coronavirus pandemic. The image-based social media app thrived as people cooped up at home looked to the company's app for inspiration. At its peak, Pinterest jumped to 478 million monthly active users (MAU) in the first quarter of 2021, before economic reopening led it to lose 55 million. As of its most recent quarter, which ended in March, it had settled at 433 million MAU.
NYSE: PINS
Key Data Points
User totals are critical because the company's app is free to join and use, and it makes money by showing advertisements to users browsing its app and platform. In 2021, revenue totaled $2.6 billion, up from $756 million in 2018. Despite the impressive growth, Pinterest has room to run. Global ad spending was $763 billion in 2021.
PINS Price to Free Cash Flow data by YCharts.
Like the others mentioned above, Pinterest sells at nearly its lowest price-to- free-cash-flow ratio in years.
Long-term investing
The near term may remain volatile as the Federal Reserve raises interest rates to bring down inflation. Further, economic reopening adds more uncertainty as consumer behavior undergoes another rapid alteration. For those reasons and plenty more, it is critical to invest long term. Giving yourself at least three years to hold an investment provides it time to weather short-term fluctuations.
