There's no denying that recent stock market volatility has unnerved investors of all ages and trading styles. Does that mean it's time to utter those famous words, "This time is different?"
Certainly not. While some factors driving the current state of the stock market may differ from previous volatile periods, if history has taught us anything, it's that the market always recovers from a downturn. And there's no reason to believe this time will be any different. When that moment happens, would you rather have been consistently building your portfolio with positions in exceptional businesses or have been sitting on the sidelines? I hope your answer is the former.
Assuming your savings and emergency fund are shored up, putting even a few hundred dollars to work in the stock market on a consistent basis -- whether by investing in just a few shares of your favorite companies or leveraging a tool like investing in fractional shares -- can make difference over the long-term. If you have $300 to invest in the stock market right now, you may want to consider adding one or both of these two very different but equally compelling businesses to your buy list. One is trading for about $23 a share and the other is trading for about $90 per share.
1. A social media stock that's fallen out of favor
Pinterest (PINS -0.52%) was a favorite stock of many investors during the early days of the pandemic. It seemed an obvious choice to add to one's portfolio with so many people stranded at home for months on end, often spending hours a day scrolling the internet. A platform like Pinterest was an ideal pastime in that time, and internet users and investors took note.
Now, with many people resuming normalcy in their daily lives, does Pinterest have a place in a post-COVID portfolio? I maintain it does, even though it faces an uphill battle.
It's easy to see why some investors have been critical of the company lately. The number of monthly active users has been dropping for several quarters and last quarter's $43 million net loss looks pretty shabby compared to $69.4 million net income in the year-ago period.
But there's more for investors to consider. While global monthly active users have declined, Pinterest has continued to be incredibly effective at monetizing the 433 million users it does have.
In the company's most recent quarter, global average revenue per user jumped 17% year over year, with overall revenue increasing 9%. Pinterest is also rapidly growing outside the U.S., Canada, and Europe, with revenue in these regions jumping 71% and average revenue per user up 80% from the year-ago period. Pinterest also closed the three-month period with a stockpile of cash on its balance sheet, to the tune of $1.6 billion.
While Pinterest currently makes most of its money through advertising, management is keen to diversify the company's growth potential as it expands on its vision of the future of social commerce (selling physical or virtual products leveraging the power of social media). In June, the company completed its acquisition of an AI-powered fashion shopping platform called The Yes, with management noting that the purchase "will help accelerate Pinterest's vision for it to be the home of taste-driven shopping."
In other words, Pinterest could be so much more than a place for people to go to get inspiration and where businesses generate leads. It could be a family of brands with its fingers in everything from online shopping to social media to advertising. Pinterest stock may be down right now, but investors could be short-sighted thinking it's down for the count.
Trading around $23 a share, $300 could buy you about 13 shares of this company.
2. A dividend powerhouse
The real estate market may be going through a tough time at the moment, but that doesn't mean you should overlook this sector altogether. Real estate tends to increase its value with time, and there are an abundance of opportunities to capitalize on that fact without taking on the risk of buying a physical property. For the individual investor, buying shares of real estate investment trust (REITs) is a great way to do this.
Innovative Industrial Properties (IIPR 0.06%) is a unique choice in the world of REITs in that it leases the facilities in its portfolio exclusively to medical cannabis growers, which are distributed across the nation. This focus on the far more broadly legalized side of the marijuana industry -- medical marijuana is on track to be a $248 billion market by 2030 -- lends a certain level of stability and predictability to its operations, which is great news for potential investors. The list of companies that lease space from Innovative Industrial Properties includes well-known names in the medical marijuana business, including Cresco Labs, Green Thumb Industries, Curaleaf, and Trulieve.
The company is also highly acquisitive and is rapidly growing its portfolio of facilities. Since Innovative Industrial Properties leases these facilities out to cannabis operators, this provides more opportunity for the company to grow its revenue and profits. It made four acquisitions in four different states in the second quarter, and in early September, it closed another acquisition in Massachusetts of a 104,000-square-foot industrial facility.
In the most recent quarter, the company reported revenue growth of 44% year over year, while its net income and adjusted funds from operations rose 37% and 40%, respectively. And total rent collection continues to be on the high end, 99% for the first half of the year.
The icing on the cake is Innovative Industrial Properties' dividend, which currently yields 8.2%. Being a REIT, it's required to distribute at least 90% of its taxable income as dividends. Over the last three years alone, the company has increased its dividend by more than 130%. Innovative Industrial Properties' above-average dividend and consistent payout history make it a compelling potential buy for income investors looking to add another long-term position to their portfolio.
Trading around $90 a share, $300 could buy you about three shares of the stock.
