Whether you're new to investing or you're a seasoned veteran, 2022 has probably been a lousy year. In the first half of 2022, the benchmark S&P 500 index disappointed investors with the worst performance we've seen in over 50 years.
Fear of a recession that may or may not happen is putting a lot of downward pressure on stock prices. Recent news of layoffs from Morgan Stanley suggests trouble that began with big tech is spreading to other sections of the economy like a malignant tumor.
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These are scary times, but the world's most successful investors remember that every recession and bear market in history has been wiped away by subsequent periods of recovery. These stocks have been under pressure this year, but that didn't stop billionaire money managers from adding them to their portfolios recently. Here's why they're so confident.
Shopify
Shopify (SHOP +8.34%) was a stock market darling during the lockdown-heavy period of the COVID-19 pandemic, but it quickly lost its luster. Shares of the e-commerce giant are down about 72% in 2022 in response to a bottom line that took an abrupt turn into negative territory.
Kenneth Griffin's multi-strategy hedge fund Citadel Advisors is way up this year, and buying over a million shares of Shopify in the third quarter is a part of the fund's winning strategy. Griffin seems to understand that Shopify's big profits in 2021 turned into losses this year because the company overcompensated for pandemic-related demand that subsided faster than expected.
NASDAQ: SHOP
Key Data Points
Griffin bought Shopify with both hands in the third quarter because he knows its lead position is getting stronger. The overall amount of goods sold on Shopify's platform rose 11% year over year in the third quarter and it looks like customers are more locked in than ever. Merchant solutions revenue as a percentage of GMV climbed to its highest level in the company's history.
Shopify's heavy investments into order fulfillment, including the $2.1 billion acquisition of Deliverr this summer, could cement its position as the go-to platform for independent merchants. That makes it look like a good stock to buy now and hold for the long run.
Shares of Shopify have fallen hard, but they fell from a very high perch. Investors should understand that at recent prices, there's still an expectation of positive cash flows in 2023. If the company can't quickly right its ship and continues posting significant losses in 2023, the stock could fall much further.
Shares of Pinterest (PINS +8.69%) are down sharply this year along with those of its industry peers. The lower prices aren't deterring Paul Singer and the hedge fund he runs, Elliott Investment Management, from buying the stock hand over fist.
NYSE: PINS
Key Data Points
Elliott more than tripled the size of its Pinterest investment by purchasing 10 million shares of the social media stock in the third quarter. Singer is no doubt attracted to the company's unique and highly lucrative role in the social media space.
Pinterest is an increasingly important social media platform for advertisers because people use it to share the type of information ad buyers need to know. Pinterest users gladly share information about the things they want to buy and the places they want to visit, so more restrictive privacy requirements aren't going to be an issue.
Declining revenue at Meta Platforms and Snap suggests advertisers are pulling away from social media, but Pinterest is bucking the trend. Successful investors noticed annual revenue per active user at Pinterest rose 11% in the third quarter.
You can scoop up Pinterest shares for 38.8 times forward-looking earnings estimates. With a unique position in the rapidly evolving space for digital ads, it has a good chance to grow into this somewhat lofty valuation.
