Investor Jim Rogers, who co-founded the Quantum Fund with George Soros, once famously said, "Bottoms in the investment world don't end with four-year lows, they end with 10- or 15-year lows." Yet, it's virtually impossible for investors to know for certain when markets are going to hit bottom -- or top out for that matter.
The good news is, if you're consistently putting cash into companies that are well-positioned for long-term, competitive growth, you don't need to divine when bear markets will veer into bull territory, or vice versa. Instead, you can focus on buying wonderful businesses that can compound your returns with time.
If you're in a position to put cash into stocks right now -- money that you don't need for household expenses or other bills -- there are plenty of intriguing stocks begging to be bought. Here are three names to consider.
1. DexCom
DexCom (DXCM -9.90%) is known for its continuous glucose monitoring (CGM) devices, which can be used by both Type 1 and Type 2 diabetics to track blood sugar levels and ensure more accurate insulin management. There are also potential use cases for pre-diabetics that could expand the potential patient population in the years ahead. Roughly half a billion adults have diabetes globally. That number is expected to balloon to roughly 643 million by the beginning of the next decade.
The point being, the market opportunity for a leader like DexCom is not only substantial but expanding. The company has a history of revenue growth and profitability. DexCom turned a profit for the first time over a decade ago. In the last five years alone, it's increased revenue by around 97%, while net income has grown in the ballpark of 240%.
A key impetus for its continued growth story has come in the form of the latest generation of its CGM systems, the G7. The device has been approved in the U.S., Europe, the U.K., and Canada, as well as in certain markets in Asia and Africa. The U.S., which is the largest diabetes market in North America and accounts for more than two-thirds of the company's revenue, remains a core area of focus for DexCom.
Since the G7 was approved in the U.S. last December, there are 8,000 physicians now prescribing the CGM that had not prescribed a DexCom product before. DexCom recently announced that all the leading pharmacy benefit managers in the U.S. cover the G7, and patients prescribed the CGM through a pharmacy pay around $20 a month compared to patients using a competitor CGM, who pay around $70.
Importantly, since the Centers for Medicare and Medicaid Services widened CGM coverage beyond intensive insulin use to individuals who use basal insulin or don't use insulin but have hypoglycemia; this has expanded DexCom's total addressable market in the U.S. alone by up to 7 million individuals. The potential for this business remains strong, and for investors seeking a profitable healthcare company with a wide moat and considerable runway left to explore, DexCom looks like a worthy contender.
2. Airbnb
Airbnb (ABNB 0.75%) isn't just a destination for people to book vacation homes. In the 16 years since the company was launched, the platform has grown to serve a wide variety of travel use cases, from business trips to weekend trips to leisure bookings, to people looking for a place to live and work for extended periods of time.
There's no denying that the travel industry as a whole has seen a notable rebound from the doldrums of the pandemic. And even as broader economic worries persist, people are spending money on experiences like travel, which is having a trickle down effect on many companies with broad exposure to the travel space.
However, the travel resurgence is far from the only factor driving Airbnb's growth story. The diversity of stays offered on its platform, and the fact that it facilitates both side of an accommodation transaction, mean that it benefits from many types of travel as well as the continued surge in people looking to list their homes on Airbnb.
Airbnb has introduced a range of upgrades to its platform in past months, from more user-friendly price-setting tools for hosts to discounts on long-term stays to more affordable stay options. After introducing discounts for stays of three months or more and adjusting Airbnb's interface to make long-term stays easier to find, management said that there was a notable surge in guests booking these types of reservations. In June alone, nights reserved for three months or more comprised one-quarter of all monthly stays.
Airbnb brought in revenue of $4.3 billion in the first six months of 2023, with profits totaling $767 million for the first half of the year. The company also generated cash from operating activities to the tune of about $2.5 billion in that six-month window. If you're looking to invest in travel stocks, a business like this that is exposed to many types of travel spending and is building a store of cash and profits looks like a no-brainer choice.
3. Amazon
Amazon (AMZN 3.43%) needs no introduction, and this mainstay company has dealt with its share of economic highs and lows through the years. After a bumpy few quarters, Amazon slashed its workforce, which was among a range of aggressive moves to cut costs and get back to profitability.
Not only did that approach, while painful, achieve what management was aiming for, but the company's leadership in the core sectors it operates in gives it a considerable competitive advantage in multiple lucrative markets. In the first half of 2023, Amazon generated net sales of $262 billion across its family of businesses, while profits for the six-month period totaled a healthy $10 billion.
Of that net sales figure, $116 billion was derived from product sales (i.e. sales on its flagship e-commerce platform) while the remaining $146 billion was derived from services sales (i.e., Amazon Web Services, Prime, etc.). In other words, Amazon is raking in most of its revenue and profits from subscription-based services, which are not only higher-margin businesses but sources of recurring income.
Trailing-12-month operating cash flow hit $62 billion as of the end of the second quarter, a 74% increase from one year ago. As Amazon has done in the past, it continues to expand beyond its cloud computing and e-commerce markets into other lucrative areas, like artificial intelligence.
The company recently started building its own AI chips and is investing billions into a top competitor of ChatGPT. Investors who want in on the next era of growth for Amazon may want to scoop up some shares of the stock in the near future.
