It's impossible to predict exactly when the next bull market will arrive, but one thing is certain: A bull market is coming. We know this because throughout history, bear markets have always led to bull markets. So right now, about a year after indexes touched bear market lows, is an excellent time to prepare for that period of market strength.
You can do this by picking up some reasonably priced growth stocks, which are the sorts of players to benefit in an environment favoring expansion. This doesn't mean you should revamp your entire portfolio -- adding just a couple of promising stocks could make a big difference. Here are two that could supercharge your portfolio during the next bull market.
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1. Shopify
When e-commerce companies win, so does Shopify (SHOP 1.11%). That's because it's the behind-the-scenes player helping e-commerce companies big and small build and operate their sites, manage payments and inventory, and generally run the entire online business.
Shopify generates revenue from subscriptions, as well as its services to merchants -- including fees on transactions. So growth in e-commerce translates into growth for Shopify's top line.
Considering that the e-commerce market is forecast to expand in the double digits this decade, there's reason to be optimistic about Shopify's prospects. And the fact that Shopify is the e-commerce software platform market leader -- with 28% share in the U.S., according to Statista -- adds to my optimism.
The e-commerce giant has a solid track record of earnings growth, which only dipped when it invested heavily in its logistics business. But here's some good news: Shopify sold that business earlier this year while still maintaining its ability to use this quality logistics service. So it's a win-win situation for the company, and we're already seeing this in the earnings reports.
In the most recent quarter, Shopify reported double-digit gains in revenue and gross profit and was free-cash-flow positive for the fourth straight quarter. The company also continues to convert more and more revenue into free cash flow, reaching 16% of revenue in the most recent quarter.
Meanwhile, the stock trades for less than half of its past valuation, even as financial metrics climb, making it a reasonable buy right now -- especially considering potential growth in a bull market.
SHOP PE Ratio (Forward) data by YCharts.
2. Carnival
Carnival (CCL -0.66%) (CUK -0.88%) shares plummeted during the earlier days of the pandemic as its ships halted sailings and the company built up a wall of debt. But the world's biggest cruise operator is successfully turning things around, with results showing in recent earnings reports.
The cruise giant paid off nearly $4 billion in debt this year and has focused on paying down variable rate borrowings. This is great because it protects the company from the impact of any future interest-rate hikes. There's also reason to be confident about Carnival's ability to continue paying down debt because it's been able to grow adjusted free cash flow and expects this trend to continue.
Carnival also is winning, thanks to renewed demand for its cruises and its own steps to become more efficient. For example, the company replaced older ships with newer more fuel-efficient ones and even is building itineraries that will favor minimal fuel usage.
As for demand, the company recorded a third-quarter record in customer deposits, reaching more than $6 billion. And the advanced booked level for 2024 has surpassed the high end of the company's historic levels -- even as cruise prices climb above this year's levels.
Carnival shares have risen, advancing 78% this year. But they still remain well below past levels, and the stock is trading near record lows, at 0.9x sales. That means this travel stock has plenty of room to run and could do just that in the next bull market.
