I don't buy stocks very often. That may sound strange, given that I analyze great investments every day. But I have my reasons:
- There is such a thing as overdiversification -- if I want to track the whole market, why not double down on a broad index fund instead?
- My pockets aren't always deep enough for splurging on another interesting stock. When my investable cash runs low, it's all right to simply add that new name to my Motley Fool CAPS account and stay on the sidelines for a while.
- And of course, there's The Motley Fool's ironclad disclosure policy. I can't touch stock tickers within a couple of days before and after writing about them, and all of us Fools must stand back when one of our newsletters is making moves on our favorite stocks.
You get used to these limits after a few years, even the newsletter-related blocks that are out of my control. I would argue that it's good for me, in fact. Master investor Warren Buffett never tries to time the market, preferring to double down on his research before committing any cash.
"I haven't the faintest idea as to whether stocks will be higher or lower a month or a year from now," Buffett said in a well-known New York Times article. "What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up."
I don't mind following the example of the greatest investor on the planet. So whenever I'm forced to hold my horses, I see it as an opportunity to double-check all my assumptions. From time to time, I'd rather keep those cold, hard dollars in my pocket after that review.
Yet, despite this cautious approach, I'm getting ready to buy some more Fiverr International (FVRR 3.74%) shares right now. Its current market valuation, even after a notable rise in recent weeks, presents an undeniable investment proposition. Fiverr is ready to lead the gig economy to new heights in the coming years, and I see solid signs of an upswing in the near future.
The gig economy's freelancing revolution
First and foremost, Fiverr is a game-changing innovator.
The company connects freelancers to people and companies who need their expertise and services. The platform focuses on creative and analytical services that can be done remotely and delivered online (in other words, movers and lawn maintenance businesses are not finding clients on Fiverr yet). But if you need a logo, a song, a social media campaign tailored to your company's needs, or even a fresh business plan for a brand-new enterprise, Fiverr will gladly put you in touch with the right freelancers. And that street goes both ways, as plenty of freelancers make their livelihood through Fiverr's platform.
It's fair to say that freelancers and contractors are disrupting many industries already. In a recent research report from Harvard Business Review and Fiverr, 51% of surveyed business leaders said they will use more freelance work and fewer long-term hires in the future. This flexible approach helps companies complete crucial tasks faster.
Aren't AI services killing the freelance market?
Fiverr critics see threats from the artificial intelligence (AI) boom. I see a solid opportunity.
The bears argue that ChatGPT and other generative AI tools can do a creative human's job both faster and cheaper, while Fiverr happily sells AI-wrangling freelance services instead. You see, those semi-creative AI systems must start their writing, composing, or drawing from a properly crafted human instruction, and the results must also be hand-picked and edited by humans. Most of the raw AI output is unusable in any professional sense, so the creative jobs for human contractors are not going away -- they're just changing.
Is Fiverr the king of contractors?
This is not the only name in the gig economy game. Upwork (UPWK 3.40%) is Fiverr's closest competitor, and arguably a better choice for managing a long-term relationship between companies and contractors. But many workers lose patience with Upwork's more detailed paperwork and reverse process -- freelancers apply for contracts on Upwork while they post profiles in search of clients on Fiverr.
There is room for both approaches in a healthy market for freelance services, and I'm not saying that Upwork is a bad choice. However, it can't compete with Fiverr's business growth and profitability:
FVRR Revenue (TTM) data by YCharts
Moreover, Upwork's slower growth and thinner profit margins have inspired a much richer valuation.
So I can get all this -- at fire-sale share prices?
Yeah, you heard me. Upwork's business model may be robust, but Fiverr runs at a higher-octane growth rate and with stronger cash profits. Still, Upwork's stock trades at 21 times trailing earnings and 58 times free cash flow, while Fiverr shares are changing hands at the modest ratios of 11 and 15, respectively.
It's not even a close call. Fiverr's quicker and friendlier service delivers stronger results than Upwork, but investors haven't accepted the company as a long-term success story after the pandemic surge of 2020 and 2021. The stock may have posted a 14% recovery from the multiyear lows at the start of November, but it's still down by 19% year to date and 33% in 52 weeks. Ergo, market makers have not yet absorbed the fact that Fiverr's business is going places in the long run, already humming despite a challenging economy, and deserving of a much higher stock price.
And that is why I plan to double down on Fiverr again, adding another tranche to the six purchases in the rearview mirror. Fiverr is the gift that keeps on giving. Like Buffett, I can't predict when the bargain-bin sale will end, but I'll gladly add more Fiverr shares on the cheap and wait for the lasting success story to play out.
