Recently Purchased Additional Shares in These 3 Confident Investments. Reasons Explained.
Investing fresh capital regularly is a surprisingly underrated, successful practice in the stock market sphere. Here's why:
Individual stocks are notorious for their rollercoaster rides, experiencing upswings and downswings. Moreover, extended periods of stagnant returns may inexplicably give way to explosive growth. Adding to this, new companies debut, and industries evolve, offering potential investors novel possibilities.
By constantly putting new funds to work, investors can reap the rewards of market fluctuations, amass shares, and explore emerging trends. This approach seems more prudent than making a one-time, significant investment in a single idea. Said investment principle forms part of our website's investing philosophy.
In search of new investment opportunities, I always find myself on the lookout for something to invest in right now. Buying a new stock is alluring. However, it's also essential to examine one's existing portfolio to see if there are investment gaps, particularly in high-conviction ideas that require further investment.
Upon conducting a portfolio review in January, I realized that my holdings in short-term rental platform Airbnb, energy-drink company Celsius, and discount retail chain Dollar General were significantly subpar. These are three compelling, high-conviction ideas that I decided to invest more in.
1. Airbnb
I had already invested in Airbnb shortly after its initial public offering, but my stock holdings had not been significantly augmented since then. Furthermore, the stock accounted for a mere 2% of my portfolio's overall value. Given my unwavering conviction in Airbnb, I wanted its contribution to my portfolio to be substantially higher. This prompted me to pour more funds into the stock.
My conviction in Airbnb primarily stems from its robust business model. Its platform seamlessly connects supply and demand, exerting control over both. With approximately 8 million active listings worldwide and 123 million nights and experiences booked in the third quarter of 2024, Airbnb's demand from travelers is indisputably high.
For every transaction, Airbnb earns a hefty commission, which translates to a high-margin revenue stream. Over the past year, the company has generated $4.1 billion in free cash flow, boasting a remarkable margin of 38%.
In addition to this, Airbnb's management team is funneling resources into innovation ideas that may or may not be related to travel. Given its substantial cash reserves, the likelihood of the company finding successful growth opportunities is decent.
2. Celsius
I acknowledge the elephant in the room: Celsius stock has surged by nearly 1,200% in the past five years. However, I made my investment after its bullish period had already transpired. Now, the stock has plummeted more than 70% from its all-time high. But, I believed that the stock was undervalued and decided to purchase even more.
In the third quarter of 2024, Celsius reported a 31% year-over-year decline in revenue, marking the first reported revenue drop in several years. Investors are concerned that the competition in the energy-drink industry is intense. But, according to the company, this downturn in revenue is merely a short-term issue with its primary distributor.
Investors believe that Celsius's sales are under pressure as the competition in the energy-drink industry intensifies. However, the company maintains that its sales data points to continued market share growth. I, too, subscribe to the notion that this means Celsius's core business remains healthy.
Celsius boasts a robust balance sheet with $900 million in cash and no long-term debt. The company has even managed to turn a profit of $164 million on a net income basis in 2024. In other words, Celsius is well-equipped to navigate the competition in both domestic and international markets.
3. Dollar General
I often invest in growth companies, choosing to allocation some of my funds to solid dividend stocks as well. Dollar General stock, then, was an attractive option given its robust dividend yield.
While Dollar General's expectations for full-year earnings per share (EPS) are subpar this year, the dividend appears to be sustainable. Moreover, the company's dividend yield now exceeds 3%. This makes Dollar General stock particularly appealing to investors seeking income opportunities.
However, if I were making investments based solely on dividend yield, I would not have chosen to invest more in Dollar General. But, the yield is enticing, and it's backed by Dollar General's reputation for surprising earnings growth.
Despite being shed of some of its profit margins, Dollar General's sales continue to grow. The company is methodically addressing the internal issues that have caused its profits to wane, which suggests a swift rally in earnings and a corresponding increase in the dividend. This makes Dollar General an intriguing investment opportunity for those who are keen on asset allocation and income generation.
Having augmented my positions in Airbnb, Celsius, and Dollar General, my portfolio is now more reflective of my long-term convictions.
- Given the significant potential for growth in Airbnb, I decided to invest more money into this stock, aiming to increase its contribution to my portfolio's overall value.
- To strengthen my portfolio's finance performance, I decided to allocate additional funds towards high-conviction ideas like Airbnb, Celsius, and Dollar General, choosing to invest money wisely in these opportunities.
