On Aug. 5, global stock markets crashed for a variety of reasons, including a weakening U.S. economy, geopolitical tensions, and a complicated investing issue called the "yen carry trade." In short, there's a lot of leverage in the investing world. And as certain things deteriorate, investors are forced to sell their stocks, which drives prices down.
It's important for investors to keep perspective: The S&P 500 is still up more than 8% year to date as of this writing, meaning this has still been a fine year for stocks. That said, the S&P 500 is now down more than 9% from all-time highs, dropping it close to what's known as correction territory.
A market correction is a great thing for long-term investors because there are usually timely opportunities. Economic concerns are valid and there are some business that will struggle. But when the S&P 500 drops, shares of quality businesses get cheaper, including the trio I'm highlighting here.
1. Pinterest
Image-browsing platform Pinterest(NYSE: PINS) just reported financial results for the second quarter of 2024, showing solid progress in multiple areas. But the stock is down more than 20% since the report, which I believe elevates the timeliness of this investment.
Pinterest ended Q2 with 522 million monthly active users, which was an all-time high. This is significant because the company generates revenue with advertising, meaning it needs people on the platform if it's going to make money. With an all-time high user base, it was able to increase Q2 ad impressions by 35% year over year, leading to strong 21% revenue growth. These are all things that investors want to see.
There's also something remarkable happening beneath the surface: Pinterest's management says that outbound clicks on its ads during Q2 more than doubled from the prior-year period. That's the third consecutive quarter of better-than-100% improvement. This implies that its advertising capabilities are suddenly far more effective than in the past. If this is true, then it's only a matter of time before advertisers boost their spend on Pinterest.
If advertisers boost their spend, Pinterest could be poised for far better growth than investors give it credit for.
Trading at less than 6 times sales, Pinterest stock has rarely been cheaper. With positive Q2 trends, I believe now is a good chance to buy this stock in light of its quick 20% pullback.
2. PubMatic
For investors worried about what the global economy might do, it can be a good idea to invest in cash-rich and debt-free companies. It's another desirable trait for Pinterest that I didn't mention. And it's a trait it shares with little-known advertising-technology (adtech) company PubMatic(NASDAQ: PUBM). It has $174 million in cash with no debt, which is quite substantial for a company that's valued at less than $1 billion.
A strong balance sheet gives companies such as PubMatic flexibility if economic conditions complicate operating activities for a season. Management teams can stay focused on the long-term prize without fretting about the near-term bills. And when it comes to adtech, the opportunity is large and growth expectations are high for the remainder of the decade. So investors do want PubMatic to stay focused on the goal.
PubMatic is scheduled to report financial results for the second quarter on Aug. 8. So investors will have to wait for the most recent trends. But in the first quarter, the company's revenue was up 20% year over year. And more revenue than ever came from its supply path optimization customers. These are customers who work with PubMatic to choose which adtech companies to keep doing business with and which to eliminate.
In other words, PubMatic's existing customer base is on solid footing, considering most trust the company to be one of the few select adtech companies it plans to work with for the long haul. This is one reason I believe PubMatic is a relatively low-risk stock for the long haul.
Moreover, PubMatic is trading at just 17 times its free cash flow. That's a bargain price for a business such as this with such high potential, and another reason it's a stock to help you get richer in 2024 and beyond.
PUBM Price to Free Cash Flow data by YCharts
3. Crocs
This last stock isn't a fashion statement but rather a financial statement: Shoe companyCrocs(NASDAQ: CROX) can make investors money in 2024 and beyond because it's such a great business and it may have some free upside if things go right.
Investors don't need to overthink an investment like this. Crocs brand shoes are increasingly popular as evidenced by its revenue growth. In the second quarter of 2024, Crocs brand revenues were up almost 10% to over $900 million. Moreover, it's a quite profitable brand with an adjusted operating margin of nearly 30%.
Those margins are great for a shoe company, giving Crocs' management plenty of money to work with. Its cash position has increased even while it's rapidly reduced debt -- it repaid $500 million in the past year and $200 million in the past quarter alone. Moreover, it regularly repurchases shares, boosting ongoing shareholder value.
CROX Total Long Term Debt (Quarterly) data by YCharts
On its own, Crocs is a good long-term opportunity. But the company also owns a brand that's underperforming right now called Heydude. It cost the company $2.5 billion to buy it in 2021, which is why it has debt to repay in the first place. And in short, sales for Heydude have stalled and its margins haven't improved as hoped.
Crocs stock is cheap today, trading at just 9 times its earnings. And I believe it can go up due to the ongoing success of the Crocs brand alone. However, if management finally gets Heydude going as it originally planned, then this provides another exciting booster to the stock price.
As an investor, I don't really have any actionable insight for the global economy. And I don't know what will happen with the Japanese yen. But I do know that good companies make it through economic challenges and go on to make money for their shareholders. And I believe that Pinterest, PubMatic, and Crocs can be three such companies for those who buy today.
Should you invest $1,000 in Pinterest right now?
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Jon Quast has positions in Crocs, Pinterest, and PubMatic. The Motley Fool has positions in and recommends Pinterest and PubMatic. The Motley Fool recommends Crocs. The Motley Fool has a disclosure policy.
