A long-term investor can find opportunities in every market environment, including the highly volatile one that has characterized the investing landscape of the last year. When you're investing in businesses, not just share prices, you can focus on the fundamentals while building a portfolio around investments that you are willing to hold through the years and that align with your financial goals.
Many investors are hoping that the gains the market has seen in 2023 could be the beginning of a new bull market. Generally, a bull market is seen to have occurred when share prices remain elevated over an extended period of time. Some bull markets have lasted for months, while others have remained intact for years.
If you consistently invest in great companies through bull markets, bear markets, and the lulls in between, you can benefit from all the stages that will inevitably come. On that note, if you're hunting for wonderful companies to scoop up right now, you don't have to look far to find any number of compelling long-term buys.
Here are two such stocks.
1. Airbnb
Airbnb (ABNB 0.75%) continues to demonstrate through the expansion of its business and the growing strength of its financials that travel is not only back but that the way in which people are traveling may be changing for good. Short-term travel patterns driven by the broad resurgence of leisure travel continue to show resilience, even in an environment where the avoidance of a recession is not a foregone conclusion. People are also continuing to use Airbnb rentals not just for vacation bookings but also to live in for prolonged periods.
In the second quarter, Airbnb reported that nights and experiences booked on its platform reached 115 million. That was an 11% increase from the same quarter in 2022, but a 37% jump from the pre-pandemic second quarter of 2019. Bookings of at least seven nights comprised 45% of all bookings on Airbnb in the second quarter of 2023. Long-term stays, which are stays of at least 28 days, totaled 18% of all reservations during that period. Importantly, stays booked for three months or more comprised 25% of all long-term reservations in the month of June alone.
The versatility of the use cases for both hosts and guests leveraging the platform is a solid competitive edge that Airbnb continues to wield. The company is also raking in revenue, profits, and cash at a generous clip. Its free cash flow of $900 million in the second quarter was up by an eye-popping 644% on a four-year basis.
Management isn't resting on its laurels, and continues to find new ways to make its platform attractive to hosts and guests. In recent months, Airbnb has rolled out a series of upgrades to make it easier for hosts to run a successful business, such as tools to enable competitive price setting. Everything from discounts on long-term stays to more ways to pay for stays through options such as buy now, pay later, or direct bank withdrawals are just a few of the upgrades Airbnb has launched for guests recently.
Airbnb and its management seem to have their finger on the pulse of changing modes of travel and what travelers want. The numbers continue to bear that thesis out. This is a notable competitive edge that may give some investors reason to take a long second look at this tech stock.
2. Etsy
Etsy (ETSY 0.34%) isn't contending with the same consumer-hungry environment of a few years back during the height of the COVID-19 pandemic. Some investors have been taken aback by growth decelerations from pandemic levels and forays into unprofitability. Still, the business is growing in core areas, and profitability is an issue that Etsy appears to be quickly righting.
One of the most newsworthy announcements that Etsy made recently was back in July when the company said that it would be selling its pandemic-era acquisition Elo7, which some have dubbed as "The Etsy of Brazil." The incorporation of this company into its family of brands made reasonable sense a few years ago, as did its foray into the largest e-commerce market in Latin America. But, most of Etsy's growth still comes from the flagship Etsy.com platform.
The addition of the Elo7 platform to Etsy's family of businesses didn't pan out as expected; the growth story that was anticipated was not playing out, and management made the decision to cut this brand loose. Over the long run, I think this makes sense, particularly as this brand was not a significant addition to or detractor from Etsy's overall growth story.
Etsy reported revenue of $629 million in the second quarter of 2023, up roughly 8% from the year-ago period. Its net income, while still down from one year ago, totaled $62 million. Active buyers on Etsy hit an all-time high of 91 million in the quarter. Moreover, if you compare Etsy's repeat buyers and habitual buyers (shoppers who bought something on Etsy on six or more days and spent at least $200 in the past year) to pre-pandemic levels, those cohorts are up 140% and 218%, respectively, on a four-year basis.
Understand that while Etsy inhabits a relatively unique niche of the e-commerce space with its focus on items that are handmade, vintage, and otherwise specialty-geared, this is a business that is broadly exposed to discretionary forms of consumer spending. That is a risk factor that investors should be aware of when considering a position in this stock. If you have a long-term buy-and-hold horizon of at least three to five years or longer, though, this factor needn't necessarily be a deterrent. Given the company's hold on a lucrative niche of the e-commerce market, its return to profitability, and still considerable growth from pre-pandemic comparisons, it might be a wise time to scoop up the stock on sale.
