Building wealth through the stock market doesn't have to be complicated, but it does require a strategic approach. Dipping in and out of the market during down periods or trying to time the best windows to invest is a flawed strategy for most investors. It can actually make your losses even worse and significantly derail your long-term investing goals.
Consistently investing in great companies in all types of markets -- bear, bull, and anything in between -- takes out the complicated guesswork and helps build a robust portfolio over time. Let's take a look at two great companies that can enrich your portfolio for many years to come and why they might belong on your 2023 buy list.
1. Airbnb
If Airbnb (ABNB 1.09%) were the average travel stock, I might not be as optimistic about its long-term growth prospects. That's not to say travel stocks don't have prolonged runways for growth as the industry rebounds from the pandemic, because many likely do. It's more of a reflection of the fact that Airbnb is attuned to the trends and developments driving the travel space forward, and it is also poised to directly benefit from workplace changes happening in the wider economy over the next decade and beyond.
It's becoming more clear that Airbnb customers are not using the service for vacation travel alone. The company's long-term stay category -- stays of at least 28 days -- has been its fastest-growing segment in recent quarters, and it accounted for about one-fifth of all stays booked as of the end of the third quarter. A big driver in the growth of this segment is the rising adoption of remote and flexible work technologies and arrangements.
A recent study of tech workers published on Statista's website asked respondents to list the biggest benefits to working remotely. Among the responses, 62% said it was the flexibility to choose their work location, while 55% attributed the ability to live where they choose as a deciding factor. With growing job flexibility across a wide range of labor sectors, not to mention the booming multibillion-dollar gig economy, more consumers may opt for less-traditional living arrangements. That could mean moving out of the city their job is in or choosing to travel and work for part or all of the year. Airbnb's platform is suited to help execute such plans.
Airbnb's management noted as much in the third-quarter earnings report:
We believe new use cases, including long-term stays and nonurban travel, are here to stay as millions of people have newfound flexibility in where they live and work. At the same time, we've also seen recovery of urban and cross-border travel, which comprised the vast majority of our business before the pandemic.
Airbnb continues to fine-tune its various business segments, including its long-term stay offerings. It also introduced incentives like AirCover coverage to help both guests and hosts feel more confident about stays and remain financially protected in case of unexpected events like an inaccurate listing or property damage.
As for its finances, Airbnb is in great shape and recently reported record profits and revenue. The company is also cash flow positive, recording more than $3 billion in free cash flow in the 12 months leading up to the end of the third quarter. The stock is up about 35.4% since the beginning of 2023 but is still down about 46% from its all-time high set in early 2021.
There could be more volatility ahead and a recession could change the trajectory of consumer spending in the short term, but Airbnb's promising long-term growth story presents a tempting opportunity worthy of a closer look.
2. Shopify
In an increasingly competitive e-commerce space, Shopify (SHOP 0.14%) continues to retain its advantage and draw merchants to its platform. There are now more than 4 million live websites worldwide using Shopify. Meanwhile, its platform draws roughly 2 million active users every day around the world to merchants' businesses.
Shopify is still growing revenue steadily and net losses are shrinking. Compared to pre-pandemic levels, its continued growth is particularly impressive. Shopify reported $1.4 billion in revenue in 2022's third quarter, up 52% compared to Q3 2019. Its adjusted gross profit of $682 million in Q3 represented a 46% increase compared to the same quarter in 2019. Shopify will report Q4 numbers on Feb. 15.
Shopify provides invaluable retail and e-commerce tools for businesses of all sizes across a wide variety of industries. Even big brands like Staples, Kraft Heinz, Gymshark, Good American, and Kylie Cosmetics rely on Shopify to manage their online store presences, leveraging the software and services the company offers.
Shopify remains firmly in growth mode, constantly upgrading its capabilities in hopes of drawing, and keeping, merchants on its platform. Just in Q3, the company launched Shopify payments in four new European markets, introduced its comprehensive cross-border selling product called Shopify Markets Pro, introduced a hardware device called POS Go for omnichannel merchants, and concluded its acquisition of Deliverr, a key addition to its existing Shopify Fulfillment Network.
Management also announced in the third-quarter earnings call that the company is working on developing a new fulfillment app for merchants while continuing to amalgamate the Shopify Fulfillment Network and Deliverr into a single, seamless supply chain solution.
Investors with the risk appetite to put cash into growth stocks right now have plenty of discounted options to choose from. Given Shopify's continued advancements against a tough macro landscape and the investments it's making in its business now, investors may want to consider adding this e-commerce stock to their list of buys this month.
