While $5,000 might not seem like much to some, with the power of investing, that money can turn into $10,000, $20,000, and $50,000 over time. Thanks to compounding, your money will grow faster the longer it's invested, so it's always a good idea to get started investing sooner rather than later.
If you're looking to double your money -- and have some patience -- keep reading to see two stocks that could turn $5,000 into $10,000 in due time.
1. Redfin
Redfin (NASDAQ: RDFN) was a big winner during the pandemic, but shares of the real estate platform tumbled in the bear market as interest rates spiked, and it has stayed down since then.
However, economic conditions are starting to change, and Redfin looks poised to capitalize on it. First, a recent settlement with the National Association of Realtors will change the way commissions in the real estate industry work, which could benefit Redfin, as it has led the fight against high commission fees.
More importantly, the company is set to benefit from falling interest rates as the housing market is showing signs of finally turning. Interest rates on 30-year fixed mortgages have fallen to 6.5%, the lowest rate in more than a year, and mortgage rates look set to come down further when the Federal Reserve is expected to start lowering interest rates at its September meeting.
Falling rates will lower monthly payments, spurring increased demand and encouraging more housing inventory to come on the market, which will benefit Redfin. There's substantial pent-up homebuying demand in the market, and home sales could spike as rates come down because many would-be sellers are waiting for rates to fall enough to justify giving up a low-rate mortgage.
During the downturn, Redfin has cut costs and shuttered its iBuying program, which should help improve margins in the recovery. Additionally, the company has invested in digital businesses that have already started to pay off, as it's added a self-service platform for agents, homeowners, and renters.
Redfin currently has a market capitalization of just $1 billion, meaning it trades at a price-to-sales ratio of around 1. If the housing market cooperates and the company returns to growth, the stock could easily double from here.
2. Super Micro Computer
Another stock with a lot of potential to double is Super Micro Computer (NASDAQ: SMCI), the fast-growing maker of servers that are popular for running artificial intelligence (AI) applications.
In order for the stock to double, Supermicro would only have to recoup its losses since March. The stock skyrocketed through the end of 2023 and the beginning of 2024 as investors discovered its rapid AI-driven growth. However, the stock has given up some of those gains as it fell following a surge when it was admitted to the S&P 500. Broader concerns about the AI boom and falling gross margins have also weighed on the stock.
Still, its most recent earnings report shows the stock is still putting up blockbuster growth numbers. Revenue jumped 143% in its recently reported fiscal fourth quarter to $5.3 billion, and it expects even faster growth in the current quarter, forecasting a top-line increase of 183%-230%. Adjusted earnings per share in the quarter nearly doubled from $3.51 to $6.25.
Supermicro looks like a great candidate to double because the company expects margins to expand this year as it monetizes earlier investments, and it benefits from the launch of a new direct liquid cooling system.
Super Micro Computer stock is also cheap, especially for a company growing as fast as it is. It currently trades at a price-to-earnings ratio of just 31, which seems to reflect recent skepticism about the long-term potential of AI.
However, Supermicro is growing quickly, and there's a long runway of growth as companies continue to invest in AI infrastructure to develop artificial general intelligence. At its current price, the stock looks like a good bet to turn $5,000 into $10,000.
Should you invest $1,000 in Super Micro Computer right now?
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Jeremy Bowman has positions in Redfin. The Motley Fool has positions in and recommends Redfin. The Motley Fool recommends the following options: short August 2024 $11 calls on Redfin. The Motley Fool has a disclosure policy.
Got $5,000? 2 Top Growth Stocks to Buy That Could Double Your Money. was originally published by The Motley Fool