With the stock market nearing new highs and concerns about inflation or a potential recession, navigating today’s market can be a little daunting. However, amid these challenges, there are still winners who will prevail in the long run regardless of market conditions – and I recently added three to my portfolio.
For various reasons, I believe these companies offer investors tremendous growth opportunities and deserve a place in every portfolio.
Driving the electric car revolution and much more
Tesla‘s (NASDAQ: TSLA) The rise to dominance in the electric vehicle market has been nothing short of impressive. As the only profitable pure electric company, Tesla is ahead of its competitors in the places that matter most.
The company’s profitability is primarily related to the continuous increase in deliveries, which is an important measure of success. Based on its latest second-quarter earnings report, Tesla deliveries continued to climb — approaching nearly 467,000 vehicles and up 83% year-over-year — which puts it on track to meet its record target of 1.8 million vehicles delivered this year.
The one drawback that investors have been focusing on lately with Tesla is the recent price cuts to attract more buyers amid rising interest rates. While Tesla’s profits have taken a hit, its ability to adjust pricing to remain competitive with other electric car makers shows just how strong the company is.
Ultimately, the Fed’s hawkish approach should pivot, making it more desirable for consumers to buy cars at reasonable interest rates. With interest rate cuts likely imminent, Tesla is set for more long-term growth, thanks to future expansion plans in Mexico and possibly India.
Although electric vehicle sales contribute significantly to Tesla’s recent success, the introduction of artificial intelligence (AI) could take the company to new heights. According to Cathy Wood, CEO of Ark Invest, Tesla’s stock could increase in value by nearly 500% by 2026, thanks to the advent of robotaxi services alone.
Wood also suggested that Tesla enter an estimated $20 trillion market by continuing to develop AI-as-a-service products powered by its supercomputer and advancing with its humanoid robot, Optimus.
New signs of life
Cryptocurrency may face skepticism, but its growing popularity among individuals and businesses cannot be denied. Coinbase (NASDAQ: Coin)The largest cryptocurrency exchange in the United States has emerged as a huge beneficiary of this growing demand.
Despite being down more than 70% from all-time highs as transaction fees wane due to the recent cryptocurrency bear market, Coinbase has taken strategic measures to adapt and diversify its revenue streams. The expansion of subscription products and services, such as membership fees, warehousing and custodial services, and new institutional options have made it easier to rely on transaction fees.
When Coinbase debuted in April 2021, transaction fees made up more than 95% of its total net revenue. However, it’s a much different story today. Coinbase’s latest earnings report revealed how the company is adjusting to a tough crypto market where transaction fees only account for half of its total net revenue. Efforts to expand product offerings helped Coinbase deliver record results in subscriptions and services with revenue growing 138% year-over-year in the first quarter.
Adding to the momentum, Coinbase recently signed agreements with Wall Street giants such as Black stone and Fidelity to provide services for new corporate Bitcoin ETF applications. Although Coinbase is already finding itself over 200% year-to-date, things are shaping up for the company to bounce back and return to previous levels. With a potential recovery in the crypto market, growth in institutional adoption, and revenue diversification encouraged, there is reason to believe that the worst may be over.
A retail giant with steady growth
After a look at Costco‘s (NASDAQ: COST) price chart, you may be wondering if it can sustain this momentum. However, a closer look at the company’s business model reveals why it is poised to remain a dominant force in the retail industry.
Despite facing many macroeconomic hurdles, such as the global pandemic, supply chain issues, and historically high inflation, Costco has continued to increase its revenue over the past few years. As a testament to its unique business model and ability to offer shoppers the best deals, the company’s total revenue increased at a compound annual rate of 12% from 2017 to 2022.
It’s no secret that Costco’s revenue model relies heavily on membership fees, which contribute a significant portion of its profits. As such, to continue increasing profits, the company must offer competitive rates and retain customers through membership renewal.
Fortunately, Costco’s global membership renewal rate is around 90%, a number that has been holding steady for some time. Moreover, its membership has increased steadily since 2014 with the most recent quarter experiencing an annual growth of 7%.
Although it recently reached its bottom line due to rising costs – a similar problem many other retailers suffer from – future expansion plans and continued membership growth make the company resilient in almost any economic climate. In times of economic uncertainty, Costco’s attractive big deals attract cost-conscious shoppers. Conversely, a company’s profits can soar during more stable economic periods as customers indulge in expensive items, such as vacation packages, home appliance upgrades, and jewelry.
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RJ Fulton holds positions at Coinbase Global, Costco Wholesale, and Tesla. The Motley Fool has and recommends positions at Coinbase Global, Costco Wholesale, and Tesla. The Motley Fool has a disclosure policy.