The key to long-term investing is buying and holding stocks of companies with solid fundamentals. Stocks from various high-growth industries can help diversify a portfolio and produce profitable returns over time. The cannabis and travel industries are experiencing rapid growth and global opportunity.
Patience is a must to reap the total rewards of investing in growth stocks. Airbnb (ABNB 0.66%), a vacation rental company, and Green Thumb Industries (GTBIF -4.36%), a cannabis multi-state operator (MSO) are two such stocks that I believe are worthwhile holding on to.
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Airbnb's consistent revenue and profit growth are impressive
Vacation rental leader Airbnb took a hit when the global pandemic halted travel. But with the resurgence in travel demand, the company and the stock appear to have recovered. This year, the stock has gone up by 55%, outpacing the market.
Airbnb's business model sets it apart from its competitors in the travel sector. Through its online platform, the business links vacationers and hosts who want to offer their homes or other properties as vacation rentals.
Airbnb's outstanding growth in the last year reveals the flexibility people have after the pandemic, which is fueling demand for travel. The adoption of remote work has allowed people to work from anywhere around the globe, including vacation rentals, boosting Airbnb's bookings.
With the option to rent even in unusual locations where most hotels may not operate, Airbnb gives visitors the chance to have a unique, personalized experience.
The company's revenue in the second quarter jumped 18% year over year to $2.5 billion. In addition, the business reported a profit of $650 million under generally accepted accounting principles (GAAP), as opposed to a net profit of $379 million in the same quarter last year.
NASDAQ: ABNB
Key Data Points
To maintain an asset-light business model and generate free cash flow, Airbnb doesn't purchase any properties. It reported free cash flow of $900 million in the second quarter, a 13% yearly increase. At the end of the quarter, it also had $10.4 billion in cash, cash equivalents, marketable securities, and restricted cash.
Rare occurrences like pandemics can temporarily slow the growth of the travel and tourism sector. However, long-term demand will always exist. The industry's value is anticipated to reach $854 billion this year and $1 trillion by 2027. Due to its highly profitable business model, this tech stock may be able to capitalize on this strong growth, making it an excellent long-term investment.
Green Thumb is an underdog in the cannabis industry
Unlike its rivals Trulieve Cannabis and Curaleaf Holdings, Green Thumb Industries doesn't have a significant presence in the U.S. market yet. However, the business is giving its peers a tough fight in terms of revenue and profits. It was able to increase its revenue from $216 million in 2019 to $1 billion in 2022.
Green Thumb is the only MSO that is currently profitable. From 39 locations across eight states in 2019 to 85 locations across 15 states as of August 2023, the company has experienced steady growth.
As a result, it was able to make money and maintain low debt levels. Green Thumb has generated a positive GAAP net income for 11 straight quarters.
OTC: GTBIF
Key Data Points
However, its most recent quarter's revenue fell by 1% year over year to $252 million. Despite the drop in revenue, it still posted a $13.4 million net profit for the quarter. Its gradual growth over the years has also allowed it to maintain low debt levels. Its debt-to-equity ratio, which is 0.16, is low when compared to its peers.
GTBIF Financial Debt to Equity (Quarterly) data by YCharts
It had $290 million in debt and $149 million in cash and cash equivalents at the end of the second quarter.
If the business keeps making consistent profits, it won't be difficult for it to expand while paying off the debt. Green Thumb targets limited license markets -- states that only permit a specific number of cannabis suppliers to operate. This enables the business to develop a base of loyal consumers.
Due to the slow progress toward legalization, marijuana stocks have recently received little attention. However, the industry as a whole is growing quickly. By 2031, experts estimate it could generate $149 billion in sales annually, growing at a compound annual rate of 20%.
A cheap growth stock like Green Thumb can provide long-term gains for patient investors with a high risk tolerance.
