Returns as of 02/12/2022
Returns as of 02/12/2022
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The market may rise or fall on any given day, for many reasons. Those short-term fluctuations are unavoidable and unpredictable. But the longer you stay invested, the more likely you are to make money. If you’d invested in the S&P 500 for any one-month period between 1931 and 2021, your odds of making money would have been 63%. If you had extended your holding period to 10 years, your odds of making money would have improved to 95%, according to BlackRock.
In other words, a buy-and-hold investment strategy makes more sense than trying to time the market. Not even the best analyst knows the future, regardless of what you may read on the internet. Build a diversified portfolio of high-quality stocks, and then wait patiently. For instance, Airbnb (NASDAQ:ABNB) and The Trade Desk (NASDAQ:TTD) fit that bill.
Here’s what you should know.
Image source: Airbnb.
Airbnb has become a giant in the travel and tourism industry. Its platform connects potential guests with nearly 6 million listings, allowing travelers to crowdsource lodgings from hosts around the world. The platform also helps travelers link up with local experts to partake in immersive experiences during their stay, such as a guided tour of Utah’s canyons or a horseback ride through southern Spain.
One of the company’s greatest assets is its asset-light business model. Hotel chains like Marriott have to spend billions of dollars on building new properties, and once that costly and time-consuming process is complete, they have to pay staff and maintain those properties. By comparison, Airbnb can onboard a new host in minutes without spending much money, making its inventory more flexible and less costly.
That resilience helped the company rebound from the pandemic more quickly than its rivals. Over the past year, Marriott saw revenue fall 16%, while Airbnb’s revenue soared 47% to $5.3 billion, and the company generated $1.6 billion in free cash flow. Better yet, gross booking value (GBV) jumped 48% to $11.9 billion in the third quarter, driven by an uptick in bookings and rates. That implies strong future revenue growth because GBV reflects the value of all nights and experiences booked during the quarter, but sales are not recognized until guests check in.
Management is also executing on a strong growth strategy. In 2021, the company ran a successful campaign to bring new hosts to the platform, and it implemented flexible search parameters to give guests more options when planning a trip. More broadly, Airbnb’s resilient business model should make it a long-term winner in the multitrillion-dollar travel and tourism industry. That’s why this growth stock looks like a smart buy.
Image source: Getty Images.
The Trade Desk operates the largest independent demand-side platform (DSP) in the ad industry. In other words, the company does not own any content, and it only works with ad buyers — a strategy that differs dramatically from rivals like Alphabet‘s Google and Meta Platforms‘ Facebook. More specifically, The Trade Desk leans on artificial intelligence to help marketers launch, measure, and optimize programmatic ad campaigns across digital channels like desktops, mobile devices, and connected TVs (CTVs).
Compared to traditional media buying — a tedious process involving manual negotiations — programmatic technology automates ad buying with software, helping marketers spend money efficiently. To that end, The Trade Desk benefits from a network effect that reinforces its leadership position. Each campaign powered by its platform generates data regarding the tastes and preferences of consumers, which feeds its AI models, making them more effective over time. As a result, its platform is very sticky. The Trade Desk has kept its customer retention rate over 95% for the last seven consecutive years.
In turn, that has translated into strong financial results. Over the past year, revenue soared 53% to $1.1 billion, and gross margin expanded 540 basis points to 81.6%. As a result, free cash flow skyrocketed 139% to $316.9 million. Shareholders have good reason to believe The Trade Desk can maintain that momentum.
In 2021, digital ad spend totaled $455 billion, accounting for 61% of total media spend. But programmatic ad spend totaled just $155 billion, accounting for only 21% of total media spend. However, in light of the advantages, The Trade Desk believes that all ad impressions will eventually be transacted programmatically, which means the company has a long runway for growth. That’s why this stock looks unstoppable.
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Stock Advisor launched in February of 2002. Returns as of 02/12/2022.
Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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