Growth stocks can be great assets for your portfolio, especially if you can stomach the volatility that usually comes with them. The journey could be a little rocky for some, but patience can pay off big for investors.
If you have $3,000 available to invest (meaning you don't need it for an emergency fund or to pay off high-interest debt), putting your money into these two growth stocks is a good choice.
These companies have had their fair share of ups and downs over the past few years, but the long-term outlook seems promising for their businesses and their industries overall. Putting $1,500 into each could end up going a long way.
1. DraftKings
DraftKings (DKNG 4.96%) is one of the leading online sportsbooks in the country. After a slump that saw it lose close to 85% of its value from Mar. 2021 to Dec. 2022, DraftKings had a much-needed rebound in 2023, surging 210%.
The global sports betting market was valued at $81.7 billion in 2022, according to Research and Markets. By 2032, it's expected to grow to $231.2 billion, representing an 11.1% compound annual growth rate (CAGR). As one of the top companies in the space, DraftKings should benefit from the industry's overall growth.
It faces pressure from platforms like FanDuel, Underdog Fantasy, and the new ESPN BET from parent Disney, but its leading technology and brand recognition should keep it among the top players in the space.
In the third quarter of 2023, DraftKings generated $790 million in revenue, up 57% year over year. The company still isn't profitable, reporting $283 million in net losses for the quarter, but that's an improvement from the $450 million it lost in year-ago quarter.
Data by YCharts.
Most investors would rather own a profitable company, but it makes sense in DraftKings' case as management's current focus is on scaling the business, especially in the U.S. which is still in the process of legalizing sports betting state by state. An aggressive strategy that secure DraftKings a leading market position early on could lead to strong profits down the road.
As of the end of 2023, 38 states and Washington, D.C., had legalized sports betting in some capacity. That leaves a fourth of the country as potential new market opportunities, including the two biggest states, California and Texas. Nobody can predict the pace at which these remaining states will legalize sports betting (if ever), but there's still a lot of potential for DraftKings in this industry.
2. CrowdStrike
CrowdStrike Holdings (CRWD 2.03%) is one of the premier cybersecurity companies in the country. It's credited with pioneering AI-native cybersecurity solutions with its first platform, called Falcon, released in 2011. Like many AI-related stocks, CrowdStrike had a great 2023, surging over 140%.
Even with its impressive 2023 run, CrowdStrike is still down more than 14% from its Nov. 2021 peak and a great buy. As companies increasingly rely on cloud services, the Internet of Things (IoT), and other online technologies, the need for cybersecurity solutions increases.
Cybersecurity is like insurance for businesses that operate online: a necessary expense to avoid much higher costs if something goes wrong. According to IBM, the average data breach worldwide cost $4.45 million in 2023, up 15% from just three years ago.
That's why companies don't mind throwing money at businesses like CrowdStrike to keep their operations secure. In the past five years, its revenue has increased 877%.
Data by YCharts.
As a pioneer in the AI-powered cybersecurity industry, CrowdStrike has a data advantage over newcomers in the space. Data is crucial to training AI models, so having years more of it is a competitive advantage, especially considering that CrowdStrike trains its AI models using over 2 trillion cybersecurity events daily.
Cybersecurity is still relatively early in its growth story. McKinsey estimates a $1.5 trillion to $2 trillion market opportunity for the technology and its service providers, with only about 10% of it currently taken advantage of. That should bode well for a leader in the space like CrowdStrike.
