After a bruising year for the markets in 2022, the past year has been much better. The major market indexes rebounded, with the growth-centric Nasdaq Composite up 43% in 2023. The best way to stay ahead of Wall Street is to focus on holding shares of quality businesses. If you do that, the stock will take care of itself over the long term.
If you're looking to put some money to work but have less than $500 to invest, a team of Motley Fool contributors has you covered. Airbnb (ABNB 0.75%), Casey's General Stores (CASY 0.71%), and RH (RH 2.28%) all made this team's cut for incredible growth stocks worth buying with a small amount of money right now. Let's find out more about why you should buy them now.
A unique travel platform makes Airbnb a standout stock
Jennifer Saibil (Airbnb): Airbnb has changed the travel landscape forever, and it's not done yet. It's been reporting double-digit sales growth despite the inflationary climate, and not only has it become extremely profitable, but it's also generating large amounts of free cash flow.
ABNB Free Cash Flow (Quarterly) data by YCharts.
There are several features that make Airbnb stand out as a business. It costs the company very little to add new listings, which can come from new hosts as well as hosts that have already created real businesses out of hosting. Listings increased 19% over last year in the 2023 third quarter, and Airbnb is seeing expansion across regions. This leads to a flywheel effect in which the more listings there are, the more customers use the platform, and the more travelers use the site, the more hosts see value in joining. With this model, Airbnb is running an asset-light business that lends itself toward margin expansion and profits.
It's also an agile platform that can easily change to meet demand, which has been happening over the past few years under the dynamic conditions of a changing pandemic. Finally, it can offer things that hotels can't, such as stays in remote areas.
Management has also been highly responsive to customer feedback from both hosts and renters. It constantly adds new features to simplify and improve the experience, such as recently redesigned pricing tools for hosts to offer long-stay discounts. That makes for a better business and higher customer satisfaction.
Airbnb stock is up 69% this year, and at the current price, it trades at a forward one-year price-to-earnings (P/E) ratio of 32. That's not cheap, but Airbnb is in an excellent position, with a large market opportunity, strong growth, and robust profitability. It could soar in 2024 and is a strong candidate for a long-term market-beating stock.
Keep investing simple with this steady grower
John Ballard (Casey's General Stores): Casey's stock has inched to new highs, up 21% in 2023. It operates over 2,500 convenience stores in the Midwest and has been around since 1968, so it's stood the test of quite a few bumps in the economy. It's a resilient business that has continued to convert traffic through a challenging time for consumer spending over the last few years.
Casey's has built a strong brand in rural towns, which gives it a competitive advantage. Customers pull over to fill up their tanks, and Casey's earns a respectable fuel margin of about $0.42 on the dollar. But the real money is made on food, for which it is well known for its specialty pizzas. Its gross margin on prepared food and beverages is 59%, much higher than fuel, and is the company's greatest driver of growth.
Another aspect to love about this business is that it has a long runway of growth ahead. Casey's just entered Texas -- its 17th state -- with an acquisition of 22 stores in November. Over the last 10 years, Casey's grew earnings per share by 16% per year, so prospects for more double-digit growth on the bottom line appear excellent, with most of the U.S. yet to see a Casey's store.
It's also to your advantage as a long-term investor that the stock is still trading at the same P/E ratio from 2013. It returned 288% over the last 10 years, so more growth from new stores should keep the stock climbing for years to come.
Housing won't be down forever
Jeremy Bowman (RH): RH, the high-end home furnishings retailer formerly known as Restoration Hardware, boomed during the pandemic, but it's struggled more recently. Revenue fell 14% in the third quarter to $751 million, and the company reported a surprise loss in the period, missing analyst estimates on both accounts.
There's no question that RH is being challenged by the weak housing market as home sales tend to lead toward spending on home furnishings, and high interest rates are also cramping spending among businesses and consumers. The company delayed the mailing of its RH Modern Sourcebook to the first quarter of next year, saying it expected demand conditions to be more favorable by then, and mortgage rates and interest rates have already begun to come down after peaking in October. The Federal Reserve's recent forecast of three interest rate cuts next year should also improve macro conditions and give RH stock a noticeable boost.
In other words, despite the recent headwinds, RH still has a strong brand in luxury home furnishings, and the company has expanded its footprint with new gallery openings in Europe and the U.S. It's also diversifying beyond home furnishings into guesthouses, yacht and jet rentals, and a coming streaming network focused on architecture and design.
RH has been a long-term winner on the stock market and has bounced back from sell-offs in the past, including when it pivoted to a membership model. As mortgage rates come down, the stock should benefit, and it looks poised to be a winner over the coming years. With shares down 59% from their peak in 2021, investors can take advantage of the current discount.
