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Motley Fool Issues Rare “All In” Buy Alert
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Even if your retirement is still decades away, the choices that you make now about your portfolio can have long-lasting ramifications for your financial health. If you’re looking for quality businesses that have multiple and durable tailwinds to generate future growth, here are two such stocks to consider adding to your buy list this month.
With discretionary spending like travel remaining below pre-pandemic levels as consumers weigh every cost more carefully and the price of travel rises, it’s not surprising that a stock like Airbnb (ABNB -2.17%) has seen a steady decline in recent months as other growth stocks have dipped to all-time lows. And it’s reasonable to expect that these trends will take time to resolve, particularly while inflation remains high, and consumers are still on edge about the possibility of a recession.
Even so, few travel stocks have seen the type of recovery Airbnb’s business has since the doldrums of the pandemic, and with good reason. Unlike a traditional hotel chain, Airbnb’s platform has many different sources of growth to tap into, even in the current environment — including business travelers, temporarily remote workers, digital nomads, and vacationers. And more and more people are actually living in Airbnbs, rather than just staying in them for shorter periods, as they would in a hotel.
In the most recent quarterly report, management said: “Long-term stays of 28 days or more remained our fastest-growing category by trip length compared to 2019. Long-term stays increased nearly 25% from a year ago and by almost 90% from [the second quarter of] 2019.”
Workers are increasingly seeing flexible and remote work as nonnegotiable, and businesses are having to make permanent accommodations. So a platform like Airbnb’s is a match made in heaven.
Also, many people continue to gravitate away from urban locales even after the height of the pandemic. Case in point: Airbnb saw active listings for non-urban stays jump nearly 50% in the most recent quarter compared to the same period in 2019, while total Nights and Experiences overall rose 24% from that window.
All told, Airbnb reported revenue of $2.1 billion in the second quarter, up 58% year over year and 73% on a three-year basis. It was its most profitable second quarter ever with net income of $379 million. And its second-quarter free cash flow was also the highest in the company’s history at $795 million.
From the work-from-home revolution to the ongoing and future recovery of travel, Airbnb is ideally situated to profit from both current and long-term dynamics. For investors with a buy-and-hold horizon of anywhere from a few years to decades, this stock is a prime contender for a profitable and well-allocated portfolio.
While Procter & Gamble (PG -1.34%) isn’t anywhere close to being a lightning-fast growth stock, it could pair well with the previous one as a tried-and-true value stock that can lend balance and gradual, consistent returns to a portfolio.
Even as consumers are contending with rising prices for daily goods and services, feeding into negative near-term dynamics even for some consumer staples stocks, there are still opportunities to capitalize on durable trends in this space.
Procter & Gamble isn’t the most exciting stock in the world. But sometimes, these “boring” stocks can be the mainstays in a long-term investor’s portfolio. The business is built on the products that consumers buy all year and use all the time.
Consumers might be tightening their belts and grimacing at price increases, but they’re most definitely not going to stop buying things like soap, household cleaners, shampoo, toilet paper, paper towels, napkins, and toothpaste. Procter & Gamble covers all these needs with brands including Head & Shoulders, Febreze, Charmin, Mr. Clean, Ivory, Bounty, and Crest.
A look at the numbers bears this out. In the most recent quarter, sales in its grooming segment rose by 3%, with the healthcare and fabric/home care segments both up 9%, and baby/feminine/family care rising 7% year over year. During the company’s fiscal 2022, overall net sales increased 5%, on par with fiscal 2020 and 2021.
Procter & Gamble’s dividend is another incredibly appealing buy point. Its payout, which currently yields 2.8%, has seen 66 consecutive years of increases, making it a Dividend King as well as a safe stock to add to your portfolio. Procter & Gamble has remarkable staying power for a powerhouse portfolio in the current environment and far beyond.
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.
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