Preferred Stock Selections that Investors are Anticipated to Accumulate Amountably in the Coming Year
Investing isn't about dwelling in the past, but purchasing companies that will thrive in the future. You're aiming to buy shares that can escalate revenue and profits, all while being priced reasonably. However, this can be challenging, particularly when the significant S&P 500 index is near its peak P/E ratio.
In bullish markets, astute investors tend to steer clear of the trendy and overpriced stocks trading at exorbitant earnings multiples. Instead, they prefer stocks that fly under the radar.
Two unnoticed stocks I believe will garner substantial attention next year are Coupang (CPNG 2.07%) and Ally Financial (ALLY -1.61%). Let me explain why I think these companies are exceptional long-term investments.
Coupang: The global e-commerce titan that has flown under the radar
One of the fastest-growing large-cap stocks globally is Coupang. Originally focusing on South Korea, this e-commerce platform has expanded into Taiwan, boasting a 70% year-to-date increase, outperforming traditional market indexes.
With nearly half of the South Korean population relying on its e-commerce website, Coupang is now as ubiquitous as Amazon in the United States and is widening the gap between competitors. Its South Korean e-commerce business revenue now totals close to $7 billion and grew 20% year over year in real terms last quarter.
Consumers are drawn to Coupang's lightning-fast delivery and the abundance of services it offers through its Rocket Wow premium subscription service. Similar to Amazon Prime, Rocket Wow grants customers access to premium movie content, discounts on food delivery, and groceries delivered within a few hours.
Coupang's vision extends beyond being a South Korean e-commerce platform. It has a fintech subsidiary, international expansion to Taiwan, and an internal food delivery service called Coupang Eats.
These components combine into Coupang's Developing Offerings revenue line, which is growing at an astounding pace. Last quarter, revenue for the segment skyrocketed 347% year over year to $975 million. Excluding its acquisition of fashion website Farfetch, the segment would still have grown sales by 146% year over year in the quarter.
Despite these aggressive investments towards growth, Coupang remains profit-generating. It posted a $64 million profit last quarter while self-funding its expansion, targeting a market opportunity of hundreds of billions of dollars annually.
Like Amazon, I anticipate Coupang's profit margins to increase as the business matures. With a market cap still below $50 billion, I think Coupang stock has room to grow exponentially into 2025 and beyond.
Ally Financial: Pioneering online and mobile banking
Ally Financial, although smaller than Coupang, is a leading online-only bank in the United States. Born from the financing arm of General Motors during its bankruptcy during the Great Recession, Ally has transformed its consumer banking from nonexistent to over $100 billion in deposits. It now boasts approximately 3.26 million depositors, a figure that has steadily risen since 2014.
Ally entices depositors by offering attractive interest rates on deposits. With no physical banking branches, Ally has significantly lower overhead costs than traditional banks. This allows it to offer superior deposit interest rates and attract customers, especially as the Federal Reserve raises benchmark interest rates.
Using these deposits, Ally make automobile loans. It earns a profit on the spread between what it charges depositors and what it can lend for car purchases. At the end of the previous quarter, Ally had $83.6 billion in retail auto loans and $23.9 billion in commercial auto loans on its balance sheet.
Recently, Ally's delinquency rates on its automotive loans have started to rise and are now higher than pre-pandemic levels. While this will impact short-term profits, it is within Ally's guidelines and an essential part of investing in a cyclical financial company.
Despite these concerns, Ally remains profitable with $884 million in net income over the past year and pays a dividend that currently yields a solid 3.41%. The stock trades at a P/E of 14 based on these downturned earnings, a valuation that should appear even more affordable as delinquencies normalize. With depositors continuing to shift to Ally for their banking needs, I predict that its total deposits will expand over the next five to ten years, fueling further earnings growth.
With this in mind, Ally seems to have all the components to deliver impressive returns for investors taking the long view.
Investing in Coupang and Ally Financial could yield significant returns in the future. For Coupang, its rapid growth in the e-commerce sector, coupled with its diverse offerings and profitability, make it an attractive long-term investment option. Ally Financial, on the other hand, with its strong online banking presence, attractive interest rates, and growing deposits, is well-positioned to deliver impressive returns over the next decade.
