Whether you're starting from scratch or adding to an existing portfolio, if you have $1,000 to invest after paying off debt and saving for emergencies, you can create a mini-portfolio of great stocks that could seriously compound over many years.
If you have a long time horizon, you might want to consider buying hot growth stocks that can really take off. Toast (TOST 3.42%) and Dutch Bros (BROS -1.04%) are two great stocks to buy right now.
1. Toast: A seamless restaurant service
Toast operates a fully loaded restaurant management platform with services like point-of-sales hardware, menu management, and payment processing.
Restaurants are complex, and managers deal with disparate tasks like hiring and payroll, supply orders, takeout and delivery, and rewards programs. Toast offers everything in one place, connecting all of a restaurant's services in one platform.
Toast also offers tiers and packages for different types and sizes of businesses. It counts 99,000 locations using its solutions and is still growing, and revenue has been increasing at a high rate. In the 2023 third quarter (ended Sept. 30, 2023), it added 6,500 new locations, and the annualized recurring run rate increased 40% over last year.
Management sees a current serviceable addressable market of $15 billion, with a global addressable market of more than $110 billion. It has a strong network effect, with about three-quarters of new business coming from inbound channels and 20% coming from referrals.
The biggest risk for investors now is that Toast isn't profitable. However, its profitability metrics are improving. Gross profit increased 50% year over year to $226 million, and net loss improved from $98 million last year to $31 million this year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was positive for the past two quarters, with the margin increasing from 1.5% in the 2023 second quarter to 3.4% in the third quarter.
Toast stock is down about 14% over the past year and trades at a price-to-sales ratio of 2.9, which is a great deal for a high-growth stock. Toast is harnessing a huge opportunity with its niche services, and Toast stock should take off as the company moves closer to profits. It may not explode overnight, but it's likely to reward shareholders as it grows.
2. Dutch Bros: The fun coffee company
Dutch Bros operates a chain of coffee shops with its own culture focused on fun, speed, and great customer service. It's developed a legion of loyal fans who prefer its custom-made beverages, and it's quickly expanding into new markets.
The company operated 831 stores as of the end of 2023, and it's expecting to open up to 165 new shops in 2024. It's currently operating in 16 U.S. states as it moves from its Oregon headquarters eastward and sees the opportunity to reach 4,000 stores over the next eight or so years.
Revenue increased 33% over last year in the 2023 third quarter (ended Sept. 30, 2023), and as it scales, profitability is building. The company-operated shop contribution margin expanded from 25.6% last year to 31% this year in the third quarter, and net income rose from $1.6 million to $13.4 million.
Dutch Bros had trouble generating higher comparable sales (comps) for a while when inflation first started to soar, but it managed to successfully increase prices to combat the impact. Comps have been increasing over the past three consecutive quarters, from a 2% decline in the 2023 first quarter to 3.8% in the second and 4% in the third.
This probably contributed to the company seeing the need for new management who can steer a larger ship. Co-founder and CEO Joth Ricci recently stepped down to make way for Christine Barone, an experienced food executive with time at coffee king Starbucks, to take Dutch Bros to the next level. She's assembled a new executive suite of similarly experienced officers.
Dutch Bros stock is down more than 25% over the past year and trades at a price-to-sales ratio of only 1.7. Dutch Bros could be an incredible long-term stock to own, and now is a great time to buy shares before they start climbing.
