The more money you put into the stock market, the greater your gains will be -- that is, if you're patient and choose wisely. An investment of $10,000 could help set the foundation for life-changing returns over the long term. Let's discuss why two of my favorite growth stocks, Luckin Coffee (LKNC.Y 2.92%) and Global-e Online (GLBE 2.44%), should have a place in your investment portfolio.
Global-e Online
Up a whopping 40% year to date, Global-e Online is shaking off the effects of the 2022 bear market. The company's unique niche is helping it maintain a stellar growth rate during this challenging time for the e-commerce industry, and it isn't too late for investors to benefit.
If international e-commerce can be likened to a gold rush, Global-e would be selling picks and shovels instead of mining the gold. The company's platform is designed to help e-commerce stores expand their reach globally by providing services like website translation, customer service, and international fulfillment. It allows merchants to focus on what they do best (running their stores) while outsourcing tasks they might be less skilled in. And business is booming.
Fourth-quarter earnings jumped 69% to $139.9 million, and management is guiding for adjusted EBITDA of $66 million to $74 million in 2023 (this will add back stock-based compensation). As a growth company, Global-e shares trade at a premium valuation of 11 times sales. But this is in line with similar enterprise-focused e-commerce stocks like Shopify, which trades for 10 times sales.
Luckin Coffee
Founded in 2017 and going public three years later, Luckin Coffee is a Chinese coffee chain with growth firing on all cylinders. Shares have already risen 9% in 2023. But with surging profits and an exciting international expansion, the bull run may be just getting started.
You may remember Luckin Coffee because of its accounting scandal, where management fabricated more than $300 million worth of 2019 sales. But the company is seeking to reinvent itself. It has brought in a new management team and implemented a new business strategy focusing on franchise partners and higher margin growth.
Image source: Getty Images.
Fourth-quarter revenue jumped 52% to $535.7 million on organic growth and the rapid rollout of new locations. Luckin's emphasis on franchises allows it to scale up rapidly while shifting some of its operational risks to a network of small businesses that individually manage the stores. The company can maintain momentum by taking this winning strategy outside China. In March, Luckin opened two new stores in Singapore, perhaps the opening salvo in a long-term international push.
But the most exciting thing about Luckin Coffee is its burgeoning profitability. In the fourth quarter, operating results jumped from a loss of RMB 120.8 million to a gain of RMB 313.2 million ($45.4 million). The bottom line should continue to improve as the business scales up.
The importance of diversification
Luckin Coffee and Global-e Online are excellent picks for investors who want to bet on medium-sized companies with excellent growth prospects. But if $10,000 is all you have to invest in the stock market, you probably don't want to put it all in one place -- even if that place is a great company. Diversification means spreading your money among many different assets, which reduces the effect if something goes wrong. It is important for long-term investing success.
