The stock market has proven to be a remarkable tool for accumulating wealth over time, but it takes patience, dedication, and a developed strategy to build a high-performing portfolio. It's also important to diversify your investments across a range of assets, sectors, and companies, not only to ensure you're not overly reliant on one particular area for growth, but also so that your portfolio can benefit from a wide variety of catalysts to build and sustain returns.
Here are two smart stocks to consider adding to your buy list in the near future that could help you reach your long-term investment goals.
1. Chewy
Chewy (CHWY 0.19%) continues to go from strength to strength, even as e-commerce spending remains in flux and customers are less inclined to part with their cash than they were in the earlier days of the pandemic.
While economic conditions are weighing on consumers, people still continue to spend money on their pets. And given the fact that Chewy's business targets all aspects of the pet owner's experience -- from food to medicine to healthcare -- the company is well-positioned to benefit from both the more variable and the relatively steady sources of pet spending.
Meanwhile, Chewy continues to build its long-term competitive advantages as an e-commerce business and leader in pet care with strategic improvements to its fulfillment network. An integral part of Chewy's shipping and fulfillment strategy is its collection of automated fulfillment centers. The company already has three in operation, and plans to open two more in the months ahead.
During its third-quarter earnings call in December, CEO Sumit Singh noted, "our automated FC network is handling an increasingly larger portion of our outbound shipping volume at progressively lower variable cost per order. In Q3, we shipped nearly 30% of our volume through our automated FC network, up from 10% in Q3 last year."
In addition to growing its selection of offerings to pet owners, Chewy is working to increase its value proposition for the retailers that sell on its platform. The company is in the process of launching a sponsored ads program that will allow certain vendors to advertise their products to the more than 20 million customers on Chewy's growing platform.
Chewy is continuing to grow revenue at a solid clip, and recently became profitable for the first time. As of the end of its most recently reported fiscal quarter, the company was also sitting on a stockpile of cash and investments to the tune of about $675 million, which represented a sequential increase of roughly 11% from the prior quarter, and no debt. This company looks to still be in its very early stages of growth, and investors who want to capitalize on the runway ahead of it may want to take a second look at it in the current discounted market environment.
2. Fiverr
Fiverr (FVRR -0.96%) is playing a pivotal role in an area that is shaping the future of work: the gig economy. More and more people are searching for gig work, whether to supplement their existing income or to replace full-time jobs.
Particularly in an environment where fears of layoffs are high due to ongoing macroeconomic challenges for companies in a range of sectors, it seems likely that more people will not only search for freelance work, but that companies might be more apt to use contract labor rather than hiring full-time workers.
In a recent survey conducted by Fiverr, nearly 1 in 4 respondents said they felt less secure about their incomes than they did a year ago. Meanwhile, 66% of those surveyed reported that they are already on a freelancing platform and plan to keep using it, or plan to join one. And a whopping 73% said they are already freelancing (and will continue to) or that they plan to start freelancing in 2023.
Fiverr continues to upgrade the value its platform offers to both buyers and sellers of freelance services while boosting its take rate of transactions, which is up to 30%. For example, the company just launched a range of new AI-centric service categories, including proofreading for AI-generated content, noting that "searches for AI-related services have increased over 1,400% in the last six months on the platform."
In the third quarter, Fiverr launched a new initiative called Project Partner that's designed to assist larger customers (those with budgets of at least $3,000) in managing their project workflows. It also introduced a second tier for its Seller Plus program, which is an invite-only initiative that allows freelancers access to tools like advanced analytics and perks like faster withdrawal of earnings on the platform. The company is steadily growing revenue, and generated adjusted EBITDA of about $7 million with a gross margin of 81% in the third quarter of 2022.
Right now, Fiverr is investing in the growth of its platform and marketing initiatives to attract more buyers and sellers. These efforts are paying off in the form of growth to its top line and take rate even as it remains unprofitable on a GAAP basis.
As the company expands its cohort of freelancers and customers, building out its competitive advantage for the long term and boosting its take rate, there's no reason to think it won't eventually reach profitability. For now, the stock presents an intriguing opportunity to invest in the evolving future of work, which may be too good for some investors to pass up.
