It's not always easy to be a long-term investor. Staying in the market through its peaks and valleys can be a real test of your investing thesis.
But if you keep increasing your holdings in your winners in all types of market conditions, while trimming your losers, you can take guesswork and market timing out of the picture. Here are two growth businesses that are just begging to be bought if you have cash to invest in stocks.
1. Teladoc
Teladoc Health (TDOC +0.19%) has provided several bumpy quarters for investors, many of whom have zeroed in on the company's series of multibillion-dollar impairment charges after apparently overpaying for Livongo back in 2020. These write-downs have cut heavily into the bottom line, but the vast majority of the losses reported recently have been accounting losses, which means they are non-cash in nature.
Even though Teladoc's bottom line is still in the red, it's important to know why. I want to see Teladoc get to profitability, but operational losses would frankly concern me much more than the mostly paper losses it continues to report.
And net losses appear to be shrinking -- the most recent quarter saw Teladoc report about $69 million in negative net income, compared to $3.8 billion in the prior quarter and $6.7 billion a year ago.
NYSE: TDOC
Key Data Points
On the other hand, revenue continues to grow steadily, driven by ongoing adoption of its digital health services, particularly its teletherapy and chronic care. Teladoc generates the vast majority of its revenue from access fees paid by customers, which are typically insurance companies and other entities (including more than half of the Fortune 500). They pay to allow access to its platform to their insureds and employees.
Individuals can also pay one-time fees for specific services on Teladoc's platform, such as general wellness visits or mental health services.
Revenue rose 11% year over year in the first quarter to $629 million. The company also generated cash from operations of $13 million. Given the context of an aging population, the rising costs of healthcare, and consumers' increasing desire for accessible care, the need for Teladoc's platform isn't going anywhere. The continued rapid expansion of the telehealth industry can continue to drive Teladoc's business, and investors who can hold the stock could reap some generous returns.
2. Chewy
Chewy (CHWY +3.37%) is another business that serves a constant and growing need, particularly as pet ownership is expected to keep increasing. A recent study by Bloomberg Intelligence found that the global pet industry is on track to jump from a valuation of about $320 billion in 2023 to $500 billion by 2030.
Chewy is benefiting from this increase in spending on pets, with revenue totaling $10 billion for 2022 and net income of $49 million. The online retailer serves a wide range of pet owners' needs, and its essentials target farm animals as well. Its product range covers food, healthcare needs, and medical insurance.
NYSE: CHWY
Key Data Points
Its online pharmacy sells generic, specialty, and compounded medications. On its telehealth service, users can pay a one-time fee to talk to a licensed veterinarian via video chat or text. And the company has partnered with Trupanion and Lemonade on pet health insurance plans to make care more accessible. Chewy launched its own wellness line of supplements last year, too.
The company is working to make a historically capital-intensive model -- selling and shipping third-party and private-label products to consumers -- more capital-efficient. It's gradually and strategically building out its network of automated fulfillment centers, while closing older, non-automated locations. Not only do these automated fulfillment centers slash the cost of operations for Chewy, but they can also help get products to consumers faster.
With consumers seeking the fastest order fulfillment possible, this increases the likelihood of repeat business, which flows to Chewy's top and bottom lines. A recession could slow spending in the near term, but with the boom in pet spending that is expected over the next five to 10 years, investors may want to take a long, hard look at this growth stock.
