If you're surveying the current state of the market and are eager to take advantage of the abundance of fantastic companies trading on sale, you're not alone. You don't need to have a lot of cash on hand to start positions in wonderful companies with promising long-term growth potential.
For example, if you have $1,000 to invest in stocks right now, here are two superior stocks to consider adding to your buy basket before the month is out.
1. Upstart
Upstart (UPST 5.43%) may not be getting the love from investors that it was a few years ago, and the stock is still trading down about 85% from its position a year ago. Still, shares have risen about 36% since the beginning of the year on the heels of some robust market days. Short-term share price movements shouldn't induce you to buy or sell a stock, but these factors can certainly be indicative of broader investor sentiment.
While there's no denying the choppy waters that Upstart faces at the moment against the backdrop of a challenging economic situation, higher risk of defaults, and blistering interest rates, the core underlying business model could pose an attractive investment opportunity for those with a well-diversified portfolio and a multiyear buy-and-hold strategy. With fewer institutional investors willing to purchase the loans processed through Upstart's platform -- and its proprietary artificial intelligence (AI)-driven model approving fewer loans due to the higher risk of default present in the current environment -- loan volume is down, revenue is down, and the company is back to being unprofitable.
Still, there are some positive signs that indicate Upstart is laying a more robust foundation for future recovery in a more favorable economic landscape. For one, it's about to productize its Upstart Macro Index as a tool for lenders to better assess the risk and default factors present in any given environment based on more accurate, current data powered by the company's unique model and machine learning capabilities. While this could still mean that institutional investors remain more hesitant to part with their capital in a difficult economic environment, these lenders should also be in a better position to make more moderate decisions about lending procedures rather than extreme shifts based on data that soon becomes outdated, all thanks to Upstart.
Upstart reported that it had 778 auto dealer partners at the end of 2022, and 92 institutions in its network of bank and credit union partners. These represented respective year-over-year increases of 90% and 120% from the end of 2021. Meanwhile, the company reported that one out of three auto loans were fully automated as of the end of the year, while 82% of all loans are now being processed on a completely automated basis. And as of the end of 2022, Upstart's model, upon which is predicated loan approval decisions as well as an assessment of default risk, had improved as much in the prior seven months as in the entire preceding 2.5 years.
The continued improvements of Upstart's model and its ability to rapidly adjust to the demands of current economic conditions mean that while loan approvals are down now, these can quickly recover as the situation gets better, as its model will continue to correct in tune with the environment of the moment. And the rapid growth of Upstart's lending partner network -- even as institutional partners are buying fewer loans -- is a good sign of the overall confidence these entities have in its platform. The coming months could be rocky for Upstart, but the ongoing potential of this business as a long-term disruptor in the overall lending space may prove too compelling for some investors to skip out on, and even a relatively small position in this fintech stock may be worthy of consideration.
2. Pinterest
Pinterest (PINS 1.01%) investors have seen a divergence in growth from the earlier days of the pandemic, but this doesn't mean this company's long-term trajectory is waning. Far from it, in fact. For one, looking at the heightened period of growth that Pinterest experienced during the pandemic -- a time when more people than ever were trapped at home with an abundance of extra time to spend online -- and using that as a barometer for its overall growth trajectory may be a short-sighted effort, at best.
In a time where growth has normalized, and consumers are utilizing online platforms like Pinterest in a more balanced way, the company is still finding ways to expand and monetize its user base while setting itself up for continued, long-term success. This is evidenced not only by Pinterest's continued steady growth from pre-pandemic levels but by the initiatives it's digging into to retain and monetize users in the current environment.
For example, between the fourth quarter of 2019 and the final quarter of 2022, Pinterest reported that revenue expanded at a compound annual growth rate to the tune of 30%. And during that same period, its monthly active users expanded at a compound annual growth rate of 10%. Pinterest also returned to steady monthly active user growth at the end of 2022 after less-than-favorable year-over-year comparisons in the prior few quarters. The company ended the year with 450 million monthly active users, up 4% on a year-over-year clip, and was profitable in the fourth quarter in the amount of $17 million.
Pinterest is leveraging tools like AI and machine learning to draw in and retain more users. CEO Bill Ready noted in the 2022 earnings call that "a lot of the progress you've seen from us over the last, you know, multiple quarters has been around using good AI and machine learning to get better recommendations, better personalization, and using that to, you know, provide better recommendations to our users," He added, "And we think there's a lot more opportunity to use those nudges to the user to help them find new use cases on Pinterest." In total, the average revenue per user grew 10% in the full year 2022.
While user growth is important, the way in which Pinterest monetizes those users is key. Pinterest's platform offers a visual-centric collection of search results for just about any topic of inspiration. While some of its photos and videos are simply the content that lives on the platform, many of these forms of content are actually advertisements paid for by merchants across virtually every industry. Merchant ad spending, on the whole, is still down right now.
However, as Pinterest continues to augment its user base and is monetizing its users well even in a challenging macro environment, this bodes well for its long-term recovery in a more free-flowing ad spend environment.
