Finding stocks that you want to buy and hold for years at a time isn’t always easy. And when you’re investing in stocks for five, 10, or more years at a time, you should be selective about the businesses you add to your portfolio. You should also prepare yourself for the fact that not all the stocks you pick will be winners all the time. A stock might lose for a long time in your portfolio before market forces finally kick in and generate a solid rebound.
There are quality businesses out there with understandable, viable growth stories that align with your investment thesis and with your long-term financial goals. When you find them, invest in them over time to eventually construct a well-diversified, profitable portfolio.
Here are two super stocks to consider adding to your basket as 2024 kicks off.
1. Pinterest
Pinterest (NYSE: PINS) stock is trading up by around 40% from its position 12 months ago, about twice the return of the S&P 500 in that same period. The image search and sharing social media platform is used by close to half a billion monthly active users around the world for ideas and inspiration across a vast range of topics. When a user inputs a search term — some of the most popular categories on Pinterest are home decor, fashion, and health and wellness — they will pull up a variety of images and videos that align with that search intent.
Some of these images and videos are ads for various products and services by the scores of brands that pay to advertise on Pinterest. Management wants Pinterest to eventually get to the point where every image or video, known as a “pin,” is shoppable. This would mean that any pin featured in the search results would link the user to an appropriate corresponding product or service.
In the third-quarter earnings call, CEO Bill Ready gave more insight into the company’s continued implementation of its strategy to make Pinterest a place where people habitually shop, taking that initial idea for inspiration and turning it into an action that results in a purchase. Interestingly, Pinterest is using artificial intelligence (AI) to help make this happen:
Our new shop, the Look Module, which we launched in Q2, helps users to easily shop what they see in lifestyle images. When a user clicks on one of these lifestyle images, the Shop the Look module will appear as a carousel within the pin close-up. Within that module, we employ AI and computer vision to then recommend similar buyable items within our merchant catalog that users can easily shop. In fact, 70% of the products recommended in Shop the Look are rated as exact or highly relevant matches.
Pinterest is also seeing growing adoption of its application programming interface (API) for conversion. A conversion API allows the brand to send data from its server to a third-party advertising platform like Pinterest, which helps enable more precise, higher-conversion ad campaigns. Pinterest is partnering with companies like Adobe and Salesforce to deploy its API for conversions, and brands are onboarding at such a clip that this single product now accounts for nearly 30% of its revenue as of the most recent quarter.
In other words, Pinterest isn’t just expanding the ad potential of its platform, but it’s also using key partnerships, new ad initiatives, and AI-driven experiences to provide an enhanced value proposition for brands and deliver more engaging, successful ads to users. Pinterest is slowly but surely growing revenue again after a series of tough quarters affected by fluctuating ad spend. It also turned a $7 million profit according to generally accepted accounting principles (GAAP) in the most recent quarter. Now could be a good time to scoop up this stock, as it looks to have abundant growth potential still to explore over the next five to 10 years.
2. PayPal
PayPal (NASDAQ: PYPL) is still trading down by around 30% from one year ago, although the stock is slightly up from its position at the start of 2024. Concerns about competition with other payment services, a slowdown in growth from a few years ago, and dampened enthusiasm from many investors toward fintech stocks compared to the height of the pandemic have all been factors.
As always, when you’re looking at a company to invest in, you need to think about it in terms of its business, not just whether the stock is up or down. A share price going up or down in and of itself tells you very little other than what investors value the stock at a given moment in time.
If you’re considering buying and holding a stock for the long term, that means you’re going to become a part owner of that business (however fractionally small an amount that might be). Looking at PayPal specifically, while growth has slowed from previous periods, much of this is a function of the macroeconomic landscape in which the business is operating rather than a negative quality attributable to the business itself.
As a leading payment processing provider, PayPal is heavily dependent on the trajectory of consumer spending. The broader fluctuations in discretionary consumer spending have impacted the business, too. While competition is ramping up in this space, consider that PayPal still accounts for roughly 40% of all online payment processing that occurs globally.
That’s a pretty wide moat to rely on as it builds future growth, and PayPal has still reported some impressive growth figures lately despite the difficult environment in which it’s operating. Total payment volume rose 15% year over year to $388 billion in the most recent quarter, while net revenue came in at $7 billion, an 8% bump from the year-ago period.
PayPal processed 6.3 billion payment transactions in the quarter, an 11% year-over-year boost. And transactions per active account for the trailing 12 months came in at 56.6, a 13% boost from the prior-year period. PayPal has grown revenue by roughly 55% over the trailing five-year period. At its current price-to-sales valuation of 2 and price-to-book ratio of 3, investors looking to buy a top growth stock at a discount may find that this business looks like a solid choice to hold onto for the long run.
Should you invest $1,000 in Pinterest right now?
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, PayPal, Pinterest, and Salesforce. The Motley Fool recommends the following options: short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
2 Super Growth Stocks to Buy Hand Over Fist for 2024 was originally published by The Motley Fool
Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
