Whether you’ve been investing for decades or just getting started, 2022 has been an extremely difficult year to pick winning stocks. The benchmark S&P 500 index has lost more than 20% of its value since the beginning of the year.
There are two important things everyday investors need to remember during times like these. First, when markets are in free fall, the shares of the best businesses can fall just as quickly as mediocre ones. Second, bear markets are always followed by longer-lasting bull markets.
These three companies are poised to succeed over the long run, but their stock prices have been beaten down severely this year. Here’s why you may want to add them to your portfolio now and hang on for the long term.
1. SoFi Technologies
Shares of SoFi Technologies (SOFI -0.93%) have lost 64.6% of their value this year in response to rising interest rates and fear of a recession. The stock’s performance doesn’t jive with the performance of its increasingly popular underlying business.
SoFi got started about a decade ago by offering student-loan refinancing, 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. Now, its consumer-banking operation boasts 4.3 million members using 6.6 million products.
SoFi is a newfangled digital-banking start-up but also has a national banking charter. This allows it to fund its lending businesses with relatively low-interest checking and savings account deposits, just like the traditional banks it’s competing against.
In addition to an up-and-coming 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, there were 117 million accounts running on the Galileo API.
Shares of Lovesac (LOVE -3.29%) have fallen 66.3% this year. The stock has been suffering partly because there’s significantly 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 it calls Sactionals. They cost a lot more than traditional furniture, but they’re so adaptable that updating an old Sactional will always be a customer’s best option.
Since Americans are spending less time at home, it should dampen Lovesac’s sales growth — but this doesn’t appear to be the case. During the six months ended July 31, 2022, total revenue soared 50% year over year to $278 million.
Lovesac estimates its total addressable market at a whopping $46.2 billion. This estimate might be a little too generous, but there’s plenty of room to grow in the highly fragmented furniture industry.
Spotify (SPOT -3.36%) stock has tumbled 60.3% this year, even though its underlying business is firing on all cylinders. With 188 million premium subscribers, Spotify is the world’s most popular audio streaming subscription service. It looks like a great stock to buy and hold right now because it’s poised to retain its leading 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 run because it’s leveraging the popularity of its music catalog to grow a highly profitable podcast operation.
Unlike musicians, podcasters can inject lucrative ads into their shows without losing their audience. Plus, podcasters don’t ask Spotify to pay per stream because their advertising partners want as much exposure as possible. Spotify has a strong head start in the podcasting industry, so investors can look forward to steady growth for years to come.
Cory Renauer has positions in SoFi Technologies, Inc., Spotify Technology, and The Lovesac Company. The Motley Fool has positions in and recommends Spotify Technology. The Motley Fool recommends The Lovesac Company. The Motley Fool has a disclosure policy.