2 Top Stocks I Wouldn't Hesitate to Invest $1,000 In Right Now

Key Points

• Rocket Companies has a massive opportunity to grow.

• PayPal's management team has ambitious growth plans.

• Both stocks could be volatile in the short-term.

• 10 stocks we like better than Rocket Companies ›

Let's be honest. The stock market is starting to look a little frothy at the current level. The average S&P 500 component has a P/E ratio that is about double the national average. But that doesn't mean that there aren't bargains to be found. Here are two companies in particular that deserve a spot on your watch list as we head into Fall.

Can this company dominate a $6 trillion market?

The real estate market in the United States is a massive one. In a typical year, about $6 trillion worth of homes are bought and sold, and that doesn't include adjacent opportunities like title services, mortgage refinancing, moving services, home staging, and more. And for the most part, the process of buying and selling real estate is clunky.

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Image source: Getty Images.

Rocket Companies (NYSE: RKT) aims to create an all-in-one real estate platform that makes transactions as smooth and painless as possible. The company is best known for its Rocket Mortgage subsidiary, which is the number one mortgage lender in the U.S., but it just acquired tech-focused brokerage Redfin and is set to finalize its acquisition of massive mortgage servicer Mr. Cooper (NASDAQ: COOP).

For starters, Rocket's mortgage opportunity is a massive one. There's a $2 trillion annual mortgage origination market, and although Rocket is an industry leader, it has a relatively small share of this fragmented industry. In fact, the 10 largest mortgage originators only have about 23% of the market. Plus, there's a huge opportunity with refinancing as interest rates (hopefully) trend lower over the next few years. Refinancing has historically been a cornerstone of Rocket's business, and with homeowners sitting on more home equity than ever before, lower rates could lead to a spike in refinancing.

I'm a big fan of the all-in-one platform idea. The combination of Redfin and Rocket creates a seamless experience from selling your home to searching for a new one and financing your purchase. Rocket is leveraging AI to automate as much of the process as possible, which not only creates a better customer experience, but makes Rocket's business more efficient. While the real estate market is still generationally slow, now could be a smart time to invest.

A bargain-priced leader that could be a home run

The market doesn't exactly seem to have much faith in PayPal's (NASDAQ: PYPL) future, valuing the stock at about 10 times free cash flow. And to be fair, some of the numbers aren't exactly exciting, such as 5% year-over-year revenue growth in the second quarter.

However, CEO Alex Chriss and the rest of PayPal's management team (all of whom have been with the business for less than two years) are doing a great job so far of turning the company around, as efficiency has improved dramatically and plenty of exciting growth initiatives have been rolling out.

For example, PayPal launched an advertising platform late last year in the hopes to leverage its customer relationships and data.

In a lengthy presentation to investors earlier this year, PayPal's management spelled out its vision and plan to take the company to a 20%+ annual earnings growth rate for the foreseeable future. Management aims to unify PayPal's platforms (PayPal, Venmo, Braintree, etc.) into on, do a much better job of monetizing Venmo, and most importantly, to pursue a significant share of the in-person payments market, of which it currently has less than 1% of a $200 billion annual revenue opportunity.

Meanwhile, PayPal is expected to generate $6 billion to $7 billion in free cash flow this year, and management is using billions to buy back stock. Since the beginning of 2022, PayPal has bought back 18% of its outstanding shares, and management clearly thinks the stock is a bargain. I agree.

Great long-term buys

I own both of these in my own portfolio, and both are rather large positions for me, so it's fair to say that they are high-conviction investments. However, they could both certainly have short-term volatility, at least while uncertainty in the economy, interest rate environment, and PayPal's turnaround plan exist.

Should you invest $1,000 in Rocket Companies right now?

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Matt Frankel has positions in PayPal and Rocket Companies. The Motley Fool has positions in and recommends PayPal and Rocket Companies. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.