The stock market had a bad year in 2022. Even after dividends, the S&P 500 plummeted 19.4% in those 12 months, while the tech-heavy Nasdaq composite fell 33.1%.
The triggers for Wall Street’s sell-off are all too familiar: Inflation, skyrocketing interest rates, persisting recession fears, and the Russia-Ukraine war snowballed into an avalanche of worries that investors couldn’t ignore, and many previously high-flying companies suffered as the “risk off” mindset took hold.
Fortunately, this created a window of opportunity for investors to buy fantastic firms at a bargain when the new year began.
Apple Inc
The first is Apple, the world’s largest publicly traded firm if you remove government-backed behemoths like Saudi Aramco. AAPL shares, like other IT firms, struggled in 2022 as recession fears and rising interest rates frightened investors in the sector.
Following an unusual 26.4% drop in 2022, Apple currently trades at 25 times earnings, providing investors with an attractive entry position for the $2.4 trillion iPhone company. Although its most recent profits report fell short of projections, this was due to supply chain inefficiencies rather than demand issues.
Indeed, Apple reported an active installed base of over 2 billion devices, with revenue in its high-margin services division over $20 billion.
AAPL stock has recovered from its 2022 difficulties, with shares up 16.1% in 2023 through February 9.
Dutch Bros Inc
While large, established companies such as Apple might provide investors with some stability, smaller companies have more possibility for growth and can help enhance portfolios.
Enter the rapidly rising coffee chain Dutch Bros, which, although being worth more than $6 billion, is roughly 0.25% the size of Apple. Revenue is exploding, up 53% year over year in the most recent quarter. With 671 sites in 14 states, Dutch Bros is virtually entirely in the West and Southwest, where it began on the West Coast.
Because of the modest footprint of its drive-thru locations, they are relatively inexpensive to open, allowing for rapid expansion.
This is reflected in the numbers: Dutch Bros plans to open 133 additional stores by 2022, representing a 25% increase in site expansion. To begin 2023, investors have flocked to BROS, which is the best-performing company among the 10 choices, with shares up 30% through Feb. 9.
Citigroup Inc
Citigroup follows a nearly $100 billion international bank with retail and investment banking divisions. Citigroup provides investors with two options: For starters, it provides a strong 4% dividend yield, which is a wonderful buffer for owners in an era of rising interest rates and soaring inflation.
Importantly, that dividend is sustainable over time, with Citigroup paying out less than 30% of earnings. Apart from its hefty dividend, Citigroup appears to be a bargain company at the moment, trading at less than 8 times forward profits and 0.54 times book value.
Warren Buffett, the famed investor and financial expert, began purchasing Citigroup stock in the first quarter of 2022 through Berkshire Hathaway Inc.
(BRK.A, BRK.B) held around $2.8 billion in the company at the end of the third quarter. Citigroup stock is up 11.6% in 2023 as of February 9.
Amazon.com Inc
Amazon, the dominant internet retailer, was also chosen one of the ten best stocks to buy for 2023, following a disastrous 2022 in which shares lost 50% of their value.
Cost inflation, a tight labor market, supply chain issues, and diminishing consumer confidence were among the factors. However, the market was far too quick to dismiss Amazon, whose crown jewel is Amazon Web Services, its enormous, rapidly growing, and massively profitable cloud services subsidiary.
AWS’s yearly revenue run rate exceeds $85 billion. Given that Microsoft Corp. (MSFT) trades for about 10 times sales, placing the same multiple on AWS values it at $850 billion.
At Amazon’s current $1 trillion valuation, investors may purchase the rest of the company’s enormous operations—which had $434 billion in sales in 2022—for around $150 billion. AMZN has been a terrific bet so far in 2023, with shares up 17% as of Feb. 9.
Walt Disney Co
The management team of a firm is one of the most essential factors to consider when choosing stocks to buy and hold for the long term. And, with the recent return of longstanding CEO Bob Iger, Disney has plenty of that.
Iger, regarded as one of the best CEOs this side of the millennium, presided over a string of massively successful acquisitions, including Pixar, Marvel Entertainment, and Lucasfilm, before handing over the CEO post to Bob Chapek in February 2020.
Disney just released its first earnings report since Iger’s return, a fiscal first quarter in which the company beat analyst projections for both earnings and revenue.
Following a price increase for streaming service Disney+, subscriber losses were lower than anticipated, but revenue from its theme parks increased by 21%.
Following a price increase for its streaming service, Disney+, subscriber losses were lower than expected, but revenue from its theme parks increased by 21% in the quarter. Iger’s enchantment has been on full display in 2023, with Disney shares up 27% year to date through February 9.
PayPal Holdings Inc
PayPal, a time-tested and well-run financial business, is trading for less than it did before the epidemic, despite earnings per share of $4.13 in 2022 – higher than any year between 2018 and 2020.
Shares fell 62% in 2022 as a result of a deteriorating macro environment and the loss of its lucrative association with eBay Inc. (EBAY). Despite a five-year average price-earnings ratio of 36.5, shares are now trading for around 20 times estimated 2023 earnings.
PayPal’s lowest P/E ratio between 2015 and 2021 was 20.3. Applying that cautious multiple to the average predicted 2023 earnings of $4.75 results in a price of $96.43 per share by early 2024, representing a 23% increase from the closing on February 9.
Recently announced agreements with Apple Pay to accept PayPal- and Venmo-branded cards could increase PayPal’s footprint in brick-and-mortar shopping, while Amazon now takes Venmo, providing PayPal access to its massive online marketplace. PYPL stock is up 10.1% in 2023 as of February.
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