As the stock market approaches new highs and concerns about inflation or a potential recession linger, navigating today's market can be a little daunting. However, amid these challenges, there are still winners who will prevail over the long term regardless of market conditions -- and I recently added three to my portfolio.
For varying reasons, I believe these companies offer investors tremendous growth opportunities and deserve a place in every portfolio.
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Leading the EV revolution and much more
Tesla's (TSLA -1.11%) rise to dominance in the electric vehicle (EV) market has been nothing short of remarkable. As the only profitable pure EV company, Tesla outshines its competitors where it counts most.
The company's profitability is primarily related to its continuous increase in deliveries, a crucial metric for success. Based on the most recent second-quarter earnings report, Tesla's deliveries continue to soar -- approaching nearly 467,000 vehicles and up 83% year over year -- putting it firmly on track to reach its record-setting goal of 1.8 million vehicles delivered this year.
The one flaw investors have focused on recently with Tesla is the recent price cuts to attract more buyers amid rising interest rates. While Tesla's profits did take a hit, their ability to adapt pricing to stay competitive with other EV makers goes to show just how strong the company is positioned.
Eventually, the Federal Reserve's hawkish approach should pivot, making it more desirable for consumers to purchase vehicles with reasonable interest rates. With the prospect of looming interest rate cuts, Tesla is set up for even more long-term growth, thanks to future expansion plans in Mexico and possibly India.
Although EV sales contribute most to Tesla's recent success, the introduction of artificial intelligence (AI) could take the company to new heights. According to Cathie Wood, CEO of Ark Invest, the value of Tesla's shares could increase almost 500% as soon as 2026, thanks to the advent of robotaxi services alone.
Wood also suggested Tesla could enter an estimated $20 trillion market by continuing to develop AI-as-a-service products backed by their supercomputer and progress with their humanoid robot, Optimus.
New signs of life
Cryptocurrencies may be met with skepticism, but there is no denying their increasing popularity among individuals and companies. Coinbase (COIN 5.68%), the largest cryptocurrency exchange in the United States, has emerged as a significant beneficiary of this growing demand.
Despite experiencing a decline of over 70% from its all-time high as transaction fees dwindled due to a recent crypto bear market, Coinbase has taken strategic measures to adapt and diversify its revenue streams. The expansion of its Subscriptions and Services products, such as membership fees, staking, custodial services, and new institutional options, have helped ease reliance upon transaction fees.
When Coinbase made its public debut in April 2021, transaction fees made up more than 95% of its total net revenue. However, it's a much different story today. Coinbase's latest earnings report revealed how the company is adapting to a difficult crypto market with transaction fees accounting for only half of its total net revenue. Efforts to expand product offerings have helped Coinbase deliver record results in Subscriptions and Services with revenue growing 138% year over year in the first quarter.
Adding to the momentum, Coinbase recently inked agreements with Wall Street giants like BlackRock and Fidelity to provide services for the firms' new spot Bitcoin ETF applications. Though Coinbase already finds itself up more than 200% year to date, things are shaping up for the company to regain its footing and return to previous levels. With a possible rebound in the crypto market, growth in institutional adoption, and encouraging revenue diversification, there is reason to believe the worst might be over.
A retail giant with consistent growth
After taking a look at Costco's (COST 1.01%) price chart, you may be wondering whether it can maintain this momentum. However, a closer look at the company's business model reveals why it is poised to remain a dominant force in the retail industry.
Despite facing a multitude of macroeconomic obstacles, such as the global pandemic, supply chain issues, and historically high inflation, Costco continued to grow its revenue over the last few years. As a testament to its unique business model and ability to offer shoppers the best deals, the company's total revenue increased at a compound annual rate of 12% from 2017 to 2022.
It's no secret that Costco's revenue model relies heavily on membership fees, which contribute a significant portion of its earnings. As such, to continue increasing profits, the company must offer competitive prices and retain customers through membership renewals.
Fortunately, Costco's global membership renewal rate stands at around 90%, a figure that has remained consistent for quite some time. Moreover, its membership has steadily increased since 2014 with the latest quarter seeing year-over-year growth of 7%.
Despite recently taking a hit to its bottom line due to rising costs -- a similar problem plaguing many other retailers -- future expansion plans and consistent membership growth make the company resilient in just about any economic climate. In times of economic uncertainty, Costco's attractive bulk deals appeal to cost-conscious shoppers. Conversely, the company's profits could soar during more stable economic periods as customers indulge in high-ticket items, such as vacation packages, home appliance upgrades, and jewelry.
