3 growth stocks to buy in October and never sell

Looking for stocks that could blow up your portfolio? Scavenging battered growth stocks from the ground is a way to generate outsized long-term gains.

This year, the Federal Reserve’s efforts to slow inflation have been a disaster for stocks of start-ups in a phase of strong growth. This means that there are plenty of battered growth stocks to choose from.

These stocks were cut in response to rising interest rates and general economic uncertainty. Their underlying businesses, however, are growing by leaps and bounds.

Image source: Getty Images.

Here’s why it’s probably only a matter of time before the market starts giving these stocks a lot more appreciation.

1. The Trading Post

Digital Advertising Specialist Actions The trading post (TTD 2.31%) skyrocketed when COVID-related lockdowns forced us to spend a lot more time in front of our devices. Lower demand, plus a market worried that a recession could limit advertising spending in general, sent the stock down 47% from its all-time high last year.

Unlike larger digital advertising companies, Metaplatforms and Alphabet, The Trade Desk does not own any advertising content or inventory. Instead, The Trade Desk operates a demand-side platform where buyers come to create and manage their ad campaigns.

We can see The Trade Desk winning over the biggest players in the digital advertising industry. During the second quarter, The Trade Desk reported total revenue that climbed 35% year-over-year. Over the same period, Alphabet’s total ad revenue increased only 12% and Meta saw a 1% decline in total revenue.

The $377 million in revenue reported by The Trade Desk in the second quarter is impressive for a company that started in 2011. That said, this is still only a tiny fraction of the addressable market for the company. Global digital advertising spending is expected to exceed $470 billion this year and top $786 billion in 2026. With room for growth and a business model that its customers prefer, the sky’s the limit for this stock.

2. Lovebag

Lovebag (TO LIKE 2.99%) is a furniture company with a unique business model that solves many of the problems its competitors are learning to live with. The company is named after the fancy bean bag chairs it still markets, but its core business is the highly adaptable modular seats the company calls Sactionals.

Lovesac customers happily pay many times more for a Sactional than they would spend for a traditional sofa because they are hyper adaptable. Since they can be stored in pieces, storing Sactionals is much less expensive than storing traditional furniture.

Sactionals are built to grow and shrink with changing family sizes and house sizes. With hundreds of upholstery options, they also adapt to changing decors. This adaptability means that updating an old Sactional will always be a better option than buying a new traditional sofa.

Lovesac’s Sactionals business is not just a concept. It is already generating significant cash flow. During the first half of the year, the company recorded a gross profit which amounted to 53% of turnover.

The company invests heavily in raising awareness of its Sactionals, and it’s working. Net sales in the three months ended July 31, 2022 climbed 45% year-over-year to $149 million.

With most of us back to normal life, this should be a terrible year for making year-over-year furniture sales comparisons. If Lovesac can increase its turnover by 45% under current conditions, it can probably accelerate once economic conditions improve. This makes it a great stock to buy now and hold for the long term.

3.SoFi Technologies

Sofi Technologies (SOFI 5.12%) the stock has been crushed about 78% from its peak last year. Demand for the all-digital banking services provided by SoFi has soared during the most intense times of the pandemic. Now that most of us are back to normal, expectations for the road ahead are less excited.

SoFi started a decade ago by refinancing student loans. It is now a full-service consumer bank with over 4.4 million members. Members can receive an annual percentage return of 2.5% on their deposits in their checking and savings accounts, which is 1.5% more than the bank offered at the start of the year. This would reduce profitability, but the rates he receives on personal loans, car loans and mortgages have increased further.

There are a lot of ins and outs to consider, but higher interest rates will most likely improve long-term profitability, and lending isn’t the only successful operation in this business. SoFi also owns Galileo, the most popular technology platform used by fintechs and other companies to quickly set up customer accounts and payment cards.

With a leading consumer banking operation, as well as a technology platform that enables more than 100 million accounts for institutional clients, SoFi’s future looks particularly bright.

Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Cory Renauer holds positions at SoFi Technologies, Inc., The Lovesac Company and The Trade Desk. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc. and The Trade Desk. The Motley Fool recommends The Lovesac Company. The Motley Fool has a disclosure policy.

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