The stock market can be an incredible way to build and sustain wealth, but it takes time, patience, and consistency to achieve rewarding returns that bear up through various market cycles. While larger investments may help grow your portfolio faster, you don't need lots of money to start building positions in the companies that interest you most.
If you have $500 to put into the stock market right now -- this should be money you won't soon need, not money better put toward bills or covering other financial obligations -- here are two fantastic stocks to consider for a long-term, buy-and-hold investment.
1. Airbnb
Shares of Airbnb (ABNB 0.10%) are still trading down by more than 30% since its IPO. This is despite its robust third-quarter earnings report, which beat on both the top and bottom lines even as macroeconomic and geopolitical headwinds affected the already beleaguered travel industry.
Investors may be worried that Airbnb's business could falter if a recession happens. Wall Street titans and revered economists still remain divided as to whether a recession may be imminent -- or, in fact, if we could be in one already.
Regardless of whether or not a recession comes, investors taking long-term positions in quality businesses shouldn't be dissuaded by relatively near-term headwinds. And when you're investing in companies for five to 10 years, if not longer, a recessionary environment can be one of these transitory headwinds.
Airbnb's continued successes despite the broader travel industry's mixed recovery come down to the simple fact that its platform isn't designed for vacation bookings alone. While other travel stocks like cruise stocks and hotel stocks have certainly begun seeing a recovery from the doldrums of the pandemic, these are businesses that typically rely on bookings from shorter-term travelers.
On the other hand, Airbnb's platform has something for everyone. Looking for a cabin in the Catskills where you can embrace your new remote work lifestyle and get away from the city for a month or more? Check. Searching for a homestay in Tuscany where your family can pick olives and connect with the locals? Check. Maybe you're taking a business trip to New York City and would prefer more of an apartment-style setup instead of a hotel? Check.
It's the versatility of Airbnb's business that makes it such a modern fit for individuals with every type of stay preference. The proof is certainly in the pudding if you look at Airbnb's financial reports.
In the first nine months of 2022, Airbnb recorded revenue to the tune of $6.5 billion, a 46% increase compared to the same period in 2021. Whereas Airbnb reported a net loss of about $407 million in the first nine months of 2021, the company generated net income of $1.6 billion in the first nine months of 2022. It also ended this period with a whopping $7.5 billion in cash and cash equivalents on hand, a 24% increase on a year-over-year basis.
In Q3 alone, nights and experiences booked on Airbnb jumped 25% year over year, while long-term stays -- bookings that meet or exceed 28 days -- accounted for a noteworthy 20% of all stays conducted through the platform. Airbnb's growth story is just getting started, and for investors with a forward-thinking mindset, now could be an excellent time to scoop this stock up at a discount.
$500 would buy you about five shares of Airbnb at its current price.
2. Shopify
While shares of Shopify (SHOP -2.37%) are still down by nearly 80% in the past year alone, the stock has popped by about 20% in the past month. The company's top line beat in its most recent quarterly report, coupled with its lower-than-projected loss, seems to have reignited enthusiasm about this stock among some investors.
As a Shopify shareholder myself, I can attest that it hasn't been easy owning this stock over the past year. As broad market sentiment has turned against growth-oriented tech stocks, Shopify has been swept in the downturn that's afflicted these types of companies.
The fact that the company remained unprofitable in recent quarters has also raised many investors' ire. This unprofitability stemmed from several factors, including a ramp-up in stock-based compensation, the strength of the U.S. dollar, and higher operating costs in the current macro environment with rampant inflation.
Another key factor has been Shopify's pattern of aggressive investments in its business infrastructure. One of the most notable was its $2.1 billion acquisition of Deliverr earlier this year as a means of boosting the capabilities of the Shopify Fulfillment Network for merchants.
At the time, the company noted: "With the addition of Deliverr's world-class software, talent, data, and scale, SFN will offer merchants a one-stop shop for their logistics needs, from initial receipt of inventory to smart distribution, through to fast delivery and easy returns."
While recent quarters generated mixed performance, Shopify has grown its annual revenue and cash from operations by respective amounts of nearly 600% and 6,300% over the trailing five-year period alone.
And in the most recent quarter, Shopify's total revenue rose 22% year over year, boosted by respective growth of 8%, 12%, and 26% in monthly recurring revenue, subscription solutions revenue, and merchant solutions revenue. Even though the company reported a net loss of about $158 million, this was a considerable improvement sequentially compared to its net loss of $1.2 billion in the prior quarter.
Shopify's acquisitive actions, and the current environment in which it's operating, will undoubtedly weigh on its bottom line in the near term. However, over the long term, its ability to meet the needs of its merchants with full-service fulfillment will not only draw more business owners to its platform, but enable it to retain these relationships through various market cycles.
Few platforms make it as easy to launch a business of any kind -- in any industry -- as Shopify does. With seamless integrations to suppliers, payment networks, and other key apps that business owners rely on to fuel customer transactions, it's not hard to see why Shopify's business model has been so incredibly sticky. This makes it a compelling buy for investors with the proper risk tolerance and time horizon.
A $500 investment in Shopify would leave you with about 16 shares right now.
