3 growth stocks down 60.3% to 66.3% to buy and hold
Whether you’ve been investing for decades or just starting out, 2022 has been an extremely difficult year to pick winning stocks. The reference S&P500 the index has lost more than 20% of its value since the start of the year.
There are two important things everyday investors need to remember at times like these. First, when the markets are in free fall, the stocks of the best companies can fall just as quickly as those of mediocre companies. Second, bear markets are always followed by more durable bull markets.
All three of these companies are poised for long-term success, but their stock prices have taken a beating this year. Here’s why you might want to add them to your portfolio now and hang in there for the long haul.
Shares of Sofi Technologies (SOFI -0.93%) have lost 64.6% of their value this year in response to rising interest rates and fears of a recession. The stock’s performance does not match the performance of its increasingly popular underlying business.
SoFi started a decade ago offering student loan refinance, and now it’s a full-service online bank with products that include checking accounts, auto loans, and credit cards. The company added 450,000 new members during the second quarter. Today, its consumer banking operation has 4.3 million members using 6.6 million products.
SoFi is a cutting-edge digital banking startup, but also has a national banking charter. This allows it to fund its lending business with relatively low-interest checking and savings account deposits, much like the traditional banks it competes with.
In addition to a booming consumer banking operation, SoFi has a rapidly growing business-to-business operation. In 2020, it acquired Galileo and its industry-leading application programming interface (API). At the end of June, 117 million accounts were running on the Galileo API.
Shares of Lovebag (TO LIKE -3.29%) have fallen 66.3% this year. The stock has suffered in part because there is much less demand for home furnishings now that pandemic-related stay-at-home orders are a distant memory.
Lovesac makes its money selling highly configurable sectional seating that it calls Sactionals. They cost a lot more than traditional furniture, but they’re so adaptable that updating an older Sactional will always be the best option for a client.
Given that Americans are spending less time at home, this should dampen Lovesac’s sales growth – but it doesn’t appear to be. In the six months ended July 31, 2022, total revenue climbed 50% year-over-year to $278 million.
Lovesac estimates its total addressable market at $46.2 billion. This estimate may be a bit too generous, but there is plenty of room to grow in the highly fragmented furniture industry.
Spotify (PLACE -3.36%) the stock has fallen 60.3% this year, even though its underlying business is running at full steam. With 188 million premium subscribers, Spotify is the most popular audio streaming subscription service in the world. It looks like a great stock to buy and hold right now, as it’s poised to maintain its leadership position.
Seasoned investors know that music streaming is a low-margin business. Spotify is a great stock to buy now and hold for the long term, as it leverages the popularity of its music catalog to build a highly profitable podcast operation.
Unlike musicians, podcasters can inject lucrative commercials into their shows without losing their audience. Also, podcasters don’t ask Spotify to pay per stream because their ad partners want as much exposure as possible. Spotify has a solid head start in the podcasting industry, so investors can expect steady growth for years to come.
Cory Renauer holds positions at SoFi Technologies, Inc., Spotify Technology and The Lovesac Company. The Motley Fool holds posts and recommends Spotify technology. The Motley Fool recommends The Lovesac Company. The Motley Fool has a disclosure policy.