Legendary investor Warren Buffett once said, "Be fearful when others are greedy and greedy only when others are fearful." This makes perfect sense. A stock that everyone loves is likely to be purchased a lot, thus driving up the price. The challenge is that for many investors, ideas about what to buy can be found easily on popular online brokerages like Robinhood (HOOD 1.18%).
However, there are some stocks listed as some of the most popular on Robinhood that are still great businesses to own, despite their popularity. And while Uncle Warren may be right, the bear market has left these stocks at attractive prices, relative to their recent past and their potential moving forward.
1. Airbnb
When fears about inflation and a potential recession first surfaced in 2022, there was some concern that Airbnb (ABNB -1.35%) might be affected by reduced discretionary spending on things like travel. So far, this has not been the case. If consumers are pulling back on spending, the recently released fourth-quarter 2022 results show no signs of affecting Airbnb's business.
In Q4, Airbnb grew its revenue to $1.9 billion, which represents a 24% increase over the year-ago quarter. This was driven by one of Airbnb's most important metrics, nights and experiences booked, which rose 20% year over year (YOY). In fact, nights and experiences bookings have grown less than 20% only once in the past two years.
This growth in revenue and guest demand may not be entirely surprising considering the pent-up desire to travel following the pandemic lockdowns. What this has led to is more important to shareholders -- profitability. 2022 was Airbnb's first full year of profitability, with net income coming in at $1.9 billion. By comparison, 2021 ended with a net loss of $352 million.
2. Target
In the summer of 2022, Target (TGT 1.30%) stock fell rather significantly in a short timeframe as the company announced it was working through serious inventory issues. Overstocking bulky items like patio furniture had forced the company to sell items at a discount, hurting margins and profits.
When Q4 results were reported recently, it appeared as though most of the inventory issues had been resolved. Inventory at the end of the quarter was 3% lower than in Q4 2021. In the discretionary category, the decrease in inventory was 13%.
Target isn't out of the woods yet, as Q4 operating margin fell to 3.7%, compared to 6.8% in Q4 2021. This was partially due to the continuing effort to rightsize the inventory. However, this should start to improve as the inventory challenges move into the rearview mirror. Target is expecting first-quarter operating margin between 4% and 5%.
3. Disney
It's difficult to think of a company more affected by the pandemic than Disney (DIS -9.51%). With its parks and other experiences shut down around the world, it's no surprise the business -- and the stock -- saw a steep decline. However, Disney has seen steady improvement as evidenced by its fiscal year 2022 results.
Revenue for 2022 grew 23% over 2021, driven by record park revenue and continued streaming subscriber growth. In the parks, experiences, and products segment, full-year revenue increased by 73% and operating income grew by 1,578%.
This significant improvement in operating income more than made up for the media and entertainment segment, which reported an operating income loss of 42%. This was to be expected, as the Disney+ streaming service is still paying high costs for content creation.
However, returning CEO Bob Iger is committed to reducing costs and improving Disney's profitability profile. Disney is planning to reduce expenses by $5.5 billion across the company, with most of those savings coming on the content side of the business.
The bottom line for investors
Each of these businesses has fought through challenging times and come out the other side. While nothing is certain in investing, the ability to fight through adversity is essential to the long-term success of any company. Past results and future opportunity make these three stocks great choices to buy and hold forever.
