If you're investing for your future, it's still a great time to buy and hold wonderful companies, even in a volatile market. While the volatility afflicting almost every sector of the market has discouraged many investors from buying, this can be an untold opportunity for those with a long-term mindset and the appropriate risk tolerance to take advantage of some great discounts.
Here are two no-brainer stocks to buy in 2023 and hold for the next several years at least.
1. Chewy
Chewy (CHWY -3.27%) may look like the average pet stock at first glance. Its popular e-commerce platform ranges from pet food to toys, and even products for larger animals like horses and goats. Keep in mind, the pet care industry is set to grow exponentially in the years ahead, with an expected rise in pet ownership and people spending more on their pets. By 2030, this space is expected to hit a global valuation of $236 billion.
Chewy is creating a business that is literally a one-stop shop for all animal owner needs. It sells a growing range of pet insurance plans, runs an online pet pharmacy that sells compounded and generic medications, and even runs a pet telehealth service where owners can chat with a licensed vet. The company is also expanding into the nonprescription drug pet wellness space, recently launching its own line of supplements called Vibeful, which include multivitamins and joint supplements.
Over the past 10 years, Chewy's revenue grew to the tune of about 80%, while cash flow from operations increased more than 300%. The company is also newly profitable, and it reported net income of $2.3 million in the third quarter of 2022.
Chewy is also working to slash costs in a competitive environment by building out its network of automated fulfillment centers. This decreases order processing times, reduces the need for manpower, and therefore, reduces operating costs. It expects to build two more automated fulfillment centers over the next year. Investors who want to capitalize on the future of pet spending may find that Chewy is a wise choice.
2. Innovative Industrial Properties
Innovative Industrial Properties (IIPR 0.06%) is a cannabis company that doesn't actually sell cannabis. The real estate investment trust (REIT) owns a portfolio of greenhouses and other industrial facilities that it leases solely to state-licensed growers of medical cannabis. Innovative Industrial Properties' business model operates on a lease-buyback and triple-net lease structure.
So, it purchases properties from its customers, and then rents them back under lengthy, multi-year lease contracts that impose the lion's share of the operating costs on the tenant rather than Innovative Industrial Properties. These lease arrangements, and the fact that the company operates solely within the more broadly legalized medical cannabis sphere, have proved to be superior growth strategies.
Over the trailing-five-year period, Innovative Industrial Properties' revenue, net income, and funds from operations (the best metric to evaluate a REIT's profitability) have risen by respective amounts of 1,280%, 1,530%, and 1,520%. It closed out 2022 with a portfolio of 110 properties, with 100% leased for an average of 15 years. The company had collected 97% of its rent due in the 12-month period as of the end of December.
Remember, REITs are required to pay out no less than 90% of their taxable earnings as dividends. Innovative Industrial Properties yields a whopping 8% at the time of this writing, and rewarded shareholders with a total return of 313% over the last five years alone while its dividend rose 620% during that time. If you're looking to invest in the potential of the multibillion-dollar cannabis industry without the risk of investing in a traditional marijuana retailer, this stock is worth your consideration.
