Insights

2 Hot Stocks to Watch in June

Temperatures are heating up. And after months of brutal drawdowns, stocks could be heating up, too. Back-to-back trading days of gains aren’t exactly a convincing reversal, but let’s be optimistic. There are a lot of great growth stocks that have been beaten down, and the best ones should bounce back with a vengeance when the time is right.

Airbnb (NASDAQ: ABNB) and Zim Integrated Shipping Services (NYSE: ZIM) are two stocks that I feel are ready to take off this summer. Let’s see why these are top hot stocks to buy in June. 

1. Airbnb

After two years of staying at home, people are ready to start traveling again. Airbnb is in pole position to cash in on the country’s reawakening. Sure, gas prices are high — and that’s going to eat into plans for cross-country road trips. Recessionary pressures are in the air — and that’s a buffet on your disposable income. 

None of this is going to stop the Airbnb revolution. With travel restrictions easing up across the globe, the world is your oyster. Airbnb sells the pearls. 

Investors may fare well with hoteliers, airlines, and cruise lines, but Airbnb is part of the new way to travel. It’s destination travel for renters. It’s a literal cottage industry for the owners behind the 6 million active listings on the platform. Revenue soared 70% in its latest quarter, and its trailing revenue is already 38% of where it was in 2019. Airbnb has already recovered from the COVID-19 crisis, but the stock is trading for less than half of its peak shortly after its initial public offering (IPO) last year. The potential is sky-high when everything starts coming together. 

2. Zim Integrated Shipping Services

You may not see shipping as a growth industry, but Zim checks a lot of boxes for growth and income investors. It’s not a surprise that Zim itself is growing right now. Companies are paying a premium to move merchandise around, and this Israeli company is cashing in on the heavy demand at high shipping rates. Revenue soared 113% in its latest quarter, fueled primarily by the doubling of its average freight rate.

The bottom line is growing even faster. Net income nearly tripled, up 190% to reach $1.7 billion on $3.7 billion in revenue. Those are some pretty juicy margins if you work the math, and Zim is all about sharing the wealth. It pays 20% of its net income to investors as a quarterly dividend. It then distributes 30% to 50% of its annual profit as a special distribution. Add up the dividends it has shelled out over the past 12 months, and that translates to a yield of more than 47%. 

It’s not sustainable. The markups will stabilize at this point, and this is also a cyclical industry. It also bears pointing out that as an Israeli company, 25% of the distributions goes back to the home country as a withholding tax. But it’s still a cheap stock generating monster growth.

It also helps that Zim isn’t some stodgy shipping company. It’s a nimble, asset-light operation, emphasizing innovation and digitalization in an industry that often lives in the past. Investors scared of leveraged companies in this climate of rising rates should take heart knowing that Zim’s balance sheet has a positive net cash position. It’s also been investing a good chunk of the money it keeps in multiple charter agreements to flesh out its fleet with ships fueled by liquefied natural gas. Transportation stocks are cyclical, but Zim has been a star of the forgotten 2021 IPO class, having more than tripled since making its market debut at $15 a share. 

Rick Munarriz has positions in ZIM Integrated Shipping Services Ltd. The Motley Fool has positions in and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.

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