Most investors can name a long list of stocks that made early shareholders wildly rich — you know, the Apple– and Netflix-type stocks. It’s incredibly tough to spot future winners, but three Motley Fool contributors think CarGurus (NASDAQ:CARG), JD.com (NASDAQ:JD), and Charles Schwab (NYSE:SCHW) deserve investors’ attention.
Driving portfolio gains
Daniel Miller (CarGurus): If you’re looking for a growth stock that many investors haven’t heard of, one intriguing option is CarGurus, which went public late in 2017. You’ve maybe seen the company’s advertising and recognize the name, but if not, CarGurus is a global online automotive marketplace that connects buyers and sellers of new and used vehicles. While there is a list of online vehicle competitors, CarGurus is the No. 1 online U.S. automotive marketplace in terms of total monthly visits, total monthly unique visitors, total monthly mobile unique visitors, and total visits per visitor.
Not only is CarGurus a step ahead of the competition per the previously mentioned metrics, it’s poised to benefit from the growing online automotive trends. Consider that consumers averaged five dealership visits prior to a purchase in 2005; in 2015 the average visits prior to purchase dropped to 1.6 due to more online shopping and research. Further, total U.S. automotive industry marketing spending online was $21 billion in 2017 and is expected to reach $27 billion in 2022. Compare that to offline marketing spending of $16 billion in 2017, which is expected to drop to $14 billion in 2022.
Going forward, CarGurus will need to grow the size of its consumer base by providing solutions for more consumer needs. CarGurus could expand by offering solutions such as inspections, finance and insurance, and warranty, among others. On the flip side of the equation, CarGurus also needs to rope in more paying dealerships and expand overseas. If management can successfully solve more consumer needs, and rope in more dealerships, the growth story becomes compelling for investors.
A Chinese juggernaut
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