The stock market is holding steady in bear market territory as 2023 approaches. No one truly knows what's in store for the coming year, but those with money available to invest should take advantage of today's rock-bottom pricing. If you're looking to put money to work, here are two no-brainer stocks I'd buy with $1,000 before the end of 2022.
1. Airbnb has massive long-term growth potential
Performance is important when evaluating a growth stock, but the company's vision and business model are equally key. Airbnb (ABNB 0.75%) checks both of those boxes, giving it fantastic long-term growth potential.
The website's roughly 4 million hosts have welcomed over 1 billion guests across the globe since its humble beginnings in 2007. Unprecedented demand for travel over the last few years has helped the company consistently exceed earnings estimates. The third quarter of 2022 was the company's most profitable quarter yet. Bookings were up 25% and free cash flow grew by 48%.
Many experts believe demand for Airbnb stays should start slowing amid today's economic uncertainty. However, I believe there's ample opportunity for continued growth. Airbnb recently introduced apartment sharing, which allows certain cooperating apartment operators in select cities to allow tenants to rent out rooms to help offset the increased cost of housing. It's also seeing more listings every year. There were 15% more listings in the third quarter of 2022 than the prior year.
I also personally believe in the vision of Airbnb. The company has completely revolutionized the travel industry with its idea of short-term rentals and has become the preferred method for many as they travel. Other companies like Expedia's VRBO and Vacasa have followed suit, offering their own take on this service. But they don't compare to Airbnb in terms of size or scale.
Airbnb is also profitable, something many other high-growth stocks can't say right now. The stock was beaten up this year, impacted by general market volatility but also due to the growing concern over the impact of a recession on travel spending. While a recession would likely affect the company negatively in the short term, it's well-positioned to withstand those challenges.
The shares trade for around 40 times earnings, which is somewhat pricey compared to its lodging peers, but still it's the most favorable valuation since going public in 2021.
2. Costco's a safe play for an uncertain economy
Costco Wholesale (COST 1.01%) may not hold as much growth opportunity as Airbnb considering the stock has been publicly traded already for 37 years and achieved stellar growth during that time. But it's still a worthy buy for growth investors, particularly at today's pricing.
The premium warehouse operator, known for its cheap prices and bulk goods, has become the third-largest retailer in the country. Its membership-based business model helps it pass savings to its customers while still achieving healthy growth for shareholders.
It's also a fantastic play if you're concerned about the economy in the coming year. There's a lot of talk about a recession in 2023, which would negatively impact most retailers. But Costco isn't like most. To start, it offers low prices for countless products. It also requires an annual membership to shop at the stores, which promotes customer loyalty.
The company doesn't hold tons of inventory like other retailers. Its bulk purchases with select partners along with its signature Kirkland products are bought in limited quantities. This helps it offer new products to its customers without compromising high inventory levels, which eat into retailers' profit margins.
The company's latest sales results -- for the month ended November -- were strong although they slightly missed analysts' forecasts. Sales were up as were earnings per share year over year, but a big boost could be coming in 2023 as it plans to increase its membership fees to help improve its operating margin, which relies heavily on membership income.
The stock is down 14% this year, which means it's trading around 34 times its forward price-to-earnings ratio. Not unlike Airbnb, this is a slight premium compared to competitors, but its past performance warrants a premium. The stock has provided double the total return of the S&P 500 over the past 25 years. And there are reasons to believe healthy growth could continue for the next 20 years.
