There's arguably no better way to supercharge an investment portfolio than investing in growth stocks. Considering that tech stocks -- which are commonly looked to for their opportunities for high growth -- have been absolutely crushed this year, today's market dip is a fantastic time to buy.
Here's a closer look at Vici Properties (VICI 1.34%), eXp World Holdings (EXPI -1.50%), and WeWork (WE) -- three real estate growth stocks that different Motley Fool contributors believe could supercharge your portfolio over the next ten years or more.
A casino REIT with no vacancies and tons of growth
Mike Price (Vici Properties): When I think of growth stocks, I usually think of software companies developing the next big thing, or biotech businesses with a new drug. You wouldn't think of a casino real estate investment trust (REIT) that owns some of the most well-known properties in the world as a high-growth stock, but Vici Properties fits the bill.
Vici has grown adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from $690 million in 2017 to $2.5 billion today, and did $29 billion worth of deals in that time. And that growth is still coming: Total revenue in the second quarter of 2022 was 76% higher than in Q2 2021.
The company now owns 43 properties, with several on the Las Vegas strip. It collected 100% of rent during the pandemic and has zero vacancies, and 96% of its leases have escalators based on the Consumer Price Index over the long term.
Perhaps the most impressive stat of all is that the stock is actually up this year. While most REITs are down 15% and some are down as much as 60%, Vici is up over 10% year to date, and its dividend currently yields 4.2%. That performance means it isn't quite in the same contrarian boat as the other stocks in this article, but at 18 times its estimated 2022 adjusted funds from operations (AFFO), the stock still looks cheap.
If you're not convinced yet: Vici has more potential growth and diversification in the pipeline. In Q2, it entered into loan agreements totaling $259 million with BigShots Golf, Cabot (another golf company), and Great Wolf Resorts (an operator of water parks). These agreements provide diversification from the casino business, while staying within the REIT's wheelhouse of recreation in general. The Cabot and BigShots agreements also give Vici the option to purchase real estate once it has been developed and lease it back.
Flipping the switch on real estate brokerages
Liz Brumer-Smith (eXp World Holdings): eXp World Holdings has completely flipped the way that real estate brokerages operate. As the first and only 100% virtual brokerage, this cloud-based company has amassed close to 83,000 agents from 21 different countries across the globe.
This is undoubtedly thanks to its unique operational and commission structure, which allows commercial and residential agents to earn more with an 80-20 split for commissions, equity-based incentives, and capped transaction fees.
Since 2017 it's provided an incredible 58% annualized return, growing by over 893%. Its revenue has increased by over 3,500%, while net income and earnings per share (EPS) have grown by over 600%. This is all absolutely staggering.
And its past growth isn't an anomaly. The earnings report for Q2 2022 showed revenue growing by 42% to $1.4 billion, while gross profit increased by 34%. And the company has zero debt.
Being in such a healthy financial position at a time of accelerated growth makes this one of my top growth stocks to buy on the market dip. The stock is down 80% from recent highs, and trading at a price-to-earnings ratio of roughly 43, which is cheap compared to most growth stocks. The company also raised its dividends by 13% this past quarter, putting its current dividend yield at just under 1%.
Down, but far from out
Kristi Waterworth (WeWork): Although COVID-19 was a complete kick in the pants, causing WeWork's stock price to collapse on uncertainty about the future of in-office work and the demand for flexible work spaces, the business has remained surprisingly robust. WeWork has been undergoing some severe restructuring that has changed some things about its business, but this extra effort has also caused the company to examine what kinds of properties and lease arrangements are the most profitable and desirable.
We Work is far from being gone, and is still making strategic purchases that better serve its pandemic-era business model. For example, in March 2022, it acquired Common Desk, a competitor in the co-working space, along with that company's 23 locations in Texas and North Carolina. These markets are still in high-growth mode, making the $21 million price tag seem pretty palatable.
Of course, a spending spree is hardly a reason to buy a stock, but what's come of this restructuring has been a significant gain in revenue and a decrease in total expenses. For the six-month period ending June 30, 2022, WeWork saw an overall gain of 33% in revenue, coupled with a 36% decrease in total expenses versus the same period a year prior.
Although workstation capacity in June 2022 was down 2% year over year, to about 917,000, memberships increased 39% from 517,000 to 720,000. Physical occupancy has also increased dramatically, from 53% in June 2021 to 72% in June 2022. This is due in part to the decrease in workstation capacity, but is far more attributable to that huge jump in memberships.
Free cash flow also continues to climb, with FCF for the six months ending June 30, 2022, at negative $710 million, compared to negative $1.33 billion one year earlier. Although WeWork is still far from being in the black, this is a 46% increase in free cash flow, which is definitely a sign of recovery.
WeWork has a long way to go before it's back on solid ground, but it's undoubtedly headed in that direction. This is why it's such a good buy right now, while the price is down. As workers continue to return to offices and co-working spaces, this stock is destined to become a jewel in the portfolio of anyone lucky enough to pick it up at a discount.
