Investing in the stock market shouldn't revolve around guessing the best moment to buy in or putting all your capital into a single investment in the hopes of generating sky-high returns. For those in it for the long haul, investing in the stock market is about consistently putting your money to work in quality companies that align with your portfolio objectives, risk tolerance, and personal financial goals.
By investing in a wide variety of companies -- ones that you've carefully researched and believe are wise additions to your portfolio -- in all types of market environments, and staying in the market even when others are heading for the hills, you can compound and sustain your returns with time. You'll also retain an advantage over those trying to time or predict the unforeseeable whims of the market.
If you have money to invest right now, here are three incredible companies worth considering for your portfolio before the year is out.
1. Fiverr International
While some investors seem to have fled from Fiverr International (FVRR 3.71%) in the current market environment, that could be a mistake over the long term. The company remains a key figure in the global freelance platform market -- a space on track to hit a valuation of $12 billion by the year 2028. The momentum of this fast-growing sector was aided by the pandemic when millions of people were forced to stay at home, and many began to reevaluate the intersection of work and life in the digital age.
That momentum continues, even amid the current economic uncertainty. In the most recent quarter, Fiverr reported that its total revenue grew 11% year over year to $83 million. Its take rate expanded 160 basis points to 30%. Even as the company is aggressively investing in marketing initiatives and building out its business as a premium platform for everyone from Fortune 500 companies to small business owners to find freelance talent, margins are improving and its losses are narrowing.
NYSE: FVRR
Key Data Points
Fiverr's net loss of $11.4 million in the third quarter was a vast improvement from the $41.9 million net loss it reported the previous quarter. Adjusted EBITDA of $6.6 million represented 7.9% of revenue, up 250 basis points sequentially.
Fiverr's 74% share-price decline in 2022 has largely been tied to negative investor sentiment in a tough market and challenging macro environment, rather than concerns about the business itself.
Not only is Fiverr continuing to grow at an impressive clip, but its position within the broader sphere of the gig economy gives it room to expand within its total addressable market for years to come. This creates a prime opportunity for forward-thinking investors to take even a modest position in this stock for its massive long-term potential.
2. Etsy
Etsy (ETSY 7.02%) is one of many e-commerce companies that have seen their stocks take a steep journey downward in recent months. Shares have fallen 43% since the beginning of 2022. Some of this decline stems from the company's performance, but much of it arises from the wider market sentiment against growth-oriented, tech-centric businesses.
A major sore spot for investors in the most recent quarter was the big $1 billion writedown Etsy reported related to acquisitions it made in 2020. However, it's important to note this was a one-time impairment charge, and a non-cash one at that.
Now, there's no denying the impact that prolonged, slower consumer spending would have on Etsy's business if the current macro environment worsens. However, the company's unique position within the broader e-commerce market due to its focus on vintage, handmade, and specialty items still offers a compelling core business model. And Etsy has established a prominent position within the highly competitive e-commerce market while being left with few direct competitors.
NYSE: ETSY
Key Data Points
Etsy continues to derive a significant portion of its growth from habitual buyers. The company defines a habitual buyer as one that buys goods on the platform on six or more days and spends more than $200 in a 12-month time frame. Habitual buyers represented 46% of Etsy's gross merchandise sales in the third quarter of 2022 alone. During the three-month period, revenue rose 12% year over year. Meanwhile, gross merchandise sales, while down year over year due to foreign currency headwinds, posted a 134% increase compared to the same quarter in 2019.
Meanwhile, the company estimates its total addressable market is not only massive but expanding, now worth a total of $2 trillion. This gives Etsy tremendous room to grow within its chosen slice of the fast-growing e-commerce industry. For investors with the risk tolerance to stomach more near-term volatility, this could be a buying opportunity that's too good to miss in the current market environment.
3. Upstart
Upstart's (UPST 1.00%) mission to shake up the world of lending is an ambitious one, and the near future could bring abundant volatility for shareholders of the fintech company. With that in mind, the core and proven platform around which Upstart operates its business is not only intact but reacting exactly as it was designed to respond to the current pressures of the market. This is a point that management has continued to reiterate even as rising interest rates and fewer loan originations have driven down its top and bottom lines.
Upstart's entire business is built around the resilience of its platform, which utilizes artificial intelligence and machine learning to assess consumer risk and determine whether or not to extend loan approvals. Not only has Upstart's cutting-edge model enabled it to approve 173% more loans compared to traditional banks with the same loss rate, but it's also realized 75% fewer defaults than these lenders at the same approval rate, according to an internal study. Even with the current environment, 75% of all loans Upstart processed in the most recent quarter were fully automated, while its network of bank and credit union partners increased almost 170% from the year-ago period.
NASDAQ: UPST
Key Data Points
Now, with less capital flowing and the risk of defaults rising in a high interest rate, low-savings environment, Upstart's model is constantly rebalancing to take these factors into account. This means that loan approvals are down and the interest rates assessed to approved loans are higher than in the recent past. Still, its proprietary platform is continually adjusting to the nuances of the current macro environment. As CEO Dave Girouard noted in the most recent earnings call:
As the leader in AI-enabled lending, we are well positioned to capitalize on these growing trends and believe that market volatility will only strengthen our position and differentiation over time. While we dislike a weakened economy as much as you do, the increase in default rates that accompany this weakness serve to train our AI models faster. While other platforms continue to retreat to serving super-prime consumers, Upstart is rapidly learning how to price and serve mainstream Americans in all market conditions.
In the company's third-quarter report, management said accuracy for Upstart's model improved as much in the trailing-fourth-month period as it did in the entire 24 months prior. While this calibration means lower approvals and higher interest rates right now, weighing on revenue and earnings in the near term, this actually reduces the risk to Upstart's business over the long term. Investors who believe in the strength and potential of Upstart's model in the years to come could find this stock is a compelling addition to a well-diversified portfolio.
