You're not alone if you're waiting with eager anticipation for the next prolonged bull market. The stock market has clocked its fair share of up and down days in the first several months of 2023, but that doesn't mean investors should give up the ship. Strong businesses with compelling growth stories haven't gone anywhere.
Even while share prices remain depressed across a range of sectors, companies that have these growth stories can be poised to deliver enviable returns in the next bull market and beyond. Here are two such names to think about adding to your buy basket right now.
1. DexCom
DexCom (DXCM 2.60%) has continued to impress as a leader in the diabetes care space for more than two decades and counting. The stock has popped 55% over the trailing 12 months. DexCom's continuous glucose monitoring devices are used by diabetics around the world to monitor their blood sugar levels and help to avoid adverse -- and in some cases, life-threatening -- blood sugar events.
The company recently came out with the latest model of its flagship CGM product, the G7, marketed as being the most accurate CGM with the fastest warm-up time of any such device currently on the market. While wear times vary, the G7 has a wear time of 10 days. The launch of the G7 is only in its relatively early stages in the U.S.; it was previously launched in key markets across Europe, the U.K., and Asia.
Despite the clear benefits of CGMs for both type 1 and type 2 diabetics -- and, in some cases, pre-diabetics -- these markets are still heavily underpenetrated. DexCom has been at the forefront of working with private insurers as well as governments to expand coverage, which should further spur adoption.
Just before the launch of the G7 in the U.S., DexCom announced that the U.S. Centers for Medicare & Medicaid Services had extended coverage of the device to all eligible beneficiaries, making this CGM the most covered and reimbursed of any such device on the market.
In the first-quarter earnings call, management noted that the CMS had also just extended coverage for CGMs to type 2 diabetics using basal insulin as well as certain hypoglycemic patients who do not use insulin. CEO Kevin Sayer noted that this represented "the largest single expansion of access to CGM in our industry's history," adding, "we size the basal-only type 2 population alone at around 3 million people in the U.S. with around half being of Medicare age."
The expansion of coverage options for wearers, and the reality that the incidence of both type 1 and type 2 diabetes is only growing, creates a vast and growing market opportunity that DexCom is continuing to readily tap. While the diabetes care space is fragmented, DexCom's market-leading devices should allow it to continue growing even as other competitors enter this space.
Profits over the trailing 12 months alone totaled $293 million, making this look like a compelling investment to buy and hold for the long haul.
2. Etsy
Etsy (ETSY -3.41%) is still trading down about 25% since the beginning of 2023. Yet, while a long-awaited recession forecast by many economists may or may not be in the offing, consumers are still continuing to shell out cash on discretionary expenditures.
In addition, the segment of the e-commerce market that Etsy targets -- which revolves around unique, handmade, and specialty items -- may be just the types of products that consumers might be more inclined to purchase in a cash-constrained environment rather than name-brand products from larger stores.
In the most recent quarter, Etsy reported consolidated gross merchandise sales of $3.1 billion across its family of brands. The Etsy marketplace generated the lion's share of this figure, coming in at $2.7 billion for the three-month period. These figures represented a slight decline on a year-over-year basis; however, revenue for the quarter came in at $641 million, up 11% from the year-ago period. Etsy also returned to profitability in the quarter, generating earnings of about $75 million.
The Etsy marketplace ended the quarter with 89.9 million active buyers, up 1% from the year-ago period. Management noted that this was "the first time this metric has grown on a year-over-year basis since the fourth quarter of 2021." The Etsy marketplace also saw 7 million new buyers flock to its platform in the three-month period, along with 21% more reactivated buyers than in the year-ago quarter.
Importantly, the platform is continuing to see astonishing growth from pre-pandemic levels. Arguably, this could present a more accurate gauge of its growth story than comparisons to the height of pandemic or to recent months when consumer spending has been in flux because of a difficult economic environment.
Case in point: The Etsy marketplace's cohorts of active buyers and repeat buyers were up 119% and 149%, respectively, in the first quarter of 2023 compared to the first quarter of 2019. And, its segment of habitual buyers (individuals who purchased $200 or more worth of goods over six or more purchase days in the last year) was up a whopping 238% on a four-year basis.
As spending levels recover, Etsy's strong footprint in its specialty segment of the e-commerce market, and the continued growth it's seeing in an otherwise challenging spending landscape, bode well for its ability to generate meaningful returns from its family of brands over the next three to five years and well beyond.
