To The Moon

The S&P 500 has had a cold start to the new year, down 6% in the month of January. This situation might be scaring investors out of the market entirely, as the downward trend could continue with uncertainty about inflation, the Fed's pending rate hikes, and the ongoing pandemic adding to the worries. 

But if you're an investor with a long time horizon, like me, then now could be the perfect time to add fresh capital to your portfolio. When the market seems overly pessimistic and full of fear is usually the best time to be aggressive. 

With $1,000 to invest, look no further than Lululemon (NASDAQ:LULU), Netflix (NASDAQ:NFLX), and PayPal (NASDAQ:PYPL) as worthy additions to your portfolio. 

Image source: Getty Images.

1. Lululemon 

Since February 2017, Lululemon's stock has soared 390%, an outstanding investment if you got in at that time. This performance can be attributed to Lululemon's impressive sales and profit growth of 166% and 175%, respectively, over the past five years. Expanding the store footprint, now at 552 locations, also helped. 

This burgeoning apparel brand sports a better gross margin, at 57.2%, than industry leader Nike. A higher metric generally indicates customers' propensity to pay premium prices for a company's products. In Lululemon's case, having a strong direct-to-consumer presence -- a channel that represented 40% of sales in the most recent quarter -- is crucial for brand relevance. 

The business first gained popularity as a seller of yoga pants to women, but it has now become a major men's outfitter. The men's segment increased revenue 44% year over year in the fiscal 2021 third quarter, while the women's segment grew 25%. Diversification of revenue sources is a positive sign. 

Lululemon shares have lost 30% in value over the past three months as the threat of higher interest rates negatively impacts high-multiple, high-growth stocks. Consequently, investors are presented with a great opportunity to buy shares in this thriving retailer at a meaningful pullback. 

2. Netflix 

This top streaming stock reported fourth-quarter 2021 financial results on Jan. 20 that disappointed investors. Management guided to 2.5 million net new subscribers in the current quarter, far less than the 6.9 million Wall Street was expecting. But despite the stock being down 17% since that announcement, Netflix has been a massive winner, rising 200% over the past five years. 

Quarterly membership growth has certainly been irregular and unpredictable after the pandemic started in the spring of 2020, but the secular shift away from traditional cable TV and toward streaming is not going away. According to data from S&P Global, there were 1.1 billion households worldwide with a cable TV subscription in 2020. This means that Netflix, with its 221.8 million customers today, still has a large runway for expansion in the years ahead.  

Billionaire hedge fund manager Bill Ackman, through his firm Pershing Square Capital Management, took advantage of the market souring on Netflix by scooping up 3.1 million shares. His firm is now a top-20 shareholder in the company. Ackman has a proven track record of pouncing on attractive investment opportunities when the time is right. That's a great endorsement for why you might want to consider owning Netflix stock as well.  

3. PayPal

Another major historical winner is fintech behemoth PayPal. Its stock has climbed 379% since the business was spun off from eBay in July 2015. PayPal has long been a pioneer in the digital payments space, and it now counts an impressive 426 million active accounts, of which 34 million are merchants. 

I think there are three main factors that make PayPal a special business. For starters, the company's brand exemplifies a relentless focus on security and ease of use. These characteristics, along with massive scale to the tune of $1.25 trillion in total payment volume in 2021, are probably why e-commerce giant Amazon chose to partner with PayPal's Venmo starting this year. 

Additionally, PayPal possesses remarkable financial metrics. In 2021, the company's non-generally accepted accounting principles (GAAP) operating margin of 24.8% was stellar. And the business continued to prove that it's a cash machine, generating $5.4 billion in free cash flow during the 12-month period. 

Lastly, the company is not done growing. Along with the Amazon partnership, initiatives to bolster the PayPal mobile app and an acquisition like that of Japanese buy now, pay later specialist Paidy showcase management's huge ambition to one day have 1 billion daily active users. 

PayPal's shares are off more than 50% from their recent high set in July 2021. The stock currently trades for a lower and more attractive price-to-earnings (P/E) ratio of below 40, making it a solid investment right now.