Stock market crash: 3 discounted stocks to buy now and never sell

Stock market crash: 3 discounted stocks to buy now and never sell

There’s no question that it’s been a challenging year for investors. Since hitting all-time highs in the first week of January, the icon has been Dow Jones industry average and broadly based S&P500 May declined by 13.5% and 18% respectively.

For the growth stock addicts Nasdaq Composite, it was an even more painful drop. The index has fallen 29% from its closing high six months ago.

While large stock market falls can be scary and tug at investors’ emotions, it’s important to recognize that corrections (and even bear markets) are a normal and inevitable part of the investment cycle. On closer inspection, every notable decline in the major indices throughout history has proven to be a buying opportunity for patient investors.

A person pointing a pen to the end of a correction on a stock chart displayed on a laptop.

Image source: Getty Images.

More importantly, deals with quality companies become more salient when the market plummets. What follows are three discounted stocks that long-term investors can confidently buy now and most likely never need to sell.

Berkshire Hathaway

If there’s one stock that has definitely proven its ability to stand the test of time, it’s its conglomerate Berkshire Hathaway (BRK.A 0.73%)(BRK. B 0.75%). Berkshire is the company run by billionaire Warren Buffett.

Since taking the reins in 1965, Buffett has overseen the creation of more than $680 billion in value for shareholders (including himself) and has delivered a compound annual return of 20.1%. Overall, we are talking about a rise of more than 3,600,000% for the company’s Class A (BRK.A) shares. While prone to bearish years, Berkshire Hathaway has a long track record of showing it regularly outperforms the S&P 500 over long periods of time.

One of the reasons Berkshire Hathaway is such a smart investment is Warren Buffett’s love of cyclical companies. A “cyclical” company does well when the US or global economy is expanding and may struggle with recessions or slowdowns.

The Oracle of Omaha recognizes that recessions are an inevitable part of the economic cycle. Rather than trying to plan for when they’ll occur, he’s filled Berkshire Hathaway’s portfolio with companies that thrive in expansion stages. The thing is, expansions last far longer than recessions, which puts Buffett’s portfolio in the perfect position to take advantage of the natural expansion in U.S. and global GDP. It’s a boring strategy that pays well over time.

Berkshire Hathaway’s other not-too-subtle secret to its success is the mountain of passive income it receives. After major investments in rafters and Verizon Over the past two years, Buffett’s company appears to be on track to generate over $6 billion in annual dividend income. Because dividend-paying companies are often profitable and proven, they’re better equipped to weather economic downturns.

Historically, every double-digit percentage drop in Berkshire Hathaway stock has been a green light for investors to buy.

A smiling person holding up a credit card with their right hand.

Image source: Getty Images.

MasterCard

A second discounted growth stock that investors can buy now and not have to worry about selling is Payment Processor MasterCard (MA 3.60%).

Much like Berkshire Hathaway, Mastercard isn’t immune to economic downturns and recessions. As consumers and businesses scale back spending, Mastercard’s sales and profits are likely to fall. The growing prospect of a U.S. recession is likely why the company’s shares have fallen nearly 20% from their all-time highs.

However, there are a variety of reasons to be excited about Mastercard’s long-term opportunity. First of all, it is a major player in the leading consumer market: the United States. Mastercard was responsible for nearly 23% of the U.S. credit card network’s purchasing volume in 2020, according to filings by the Big Four credit card networks with the Securities and Exchange Commission. That’s a lucrative position considering economic expansions far outpace recessions.

Investors can also rejoice and take comfort in the fact that Mastercard acts solely as a payment processor. Although a lender would probably have no trouble earning interest income and fees, becoming a lender means being exposed to loan defaults during recessions. Because the company does not lend, there is no need to set aside capital during recessions. This explains why Mastercard can recover faster than most financial stocks after a downturn in the US or global economy.

Speaking of the global economy, a large proportion of transactions are still processed with cash. Mastercard has a long run to expand its payments infrastructure into emerging markets, either organically or through acquisitions. The ability to rely on predictable cash flows from developed markets, as well as accelerating growth in emerging markets, should allow Mastercard to sustain a long-term annual growth rate of around 10%.

Mickey and Minnie Mouse welcome guests to Disneyland.

Image source: Disneyland.

Walt Disney

The third discounted stock just begging to be bought and never sold is the amusement park operator and entertainment king Walt Disney (DIS 2.90%). The company’s shares are down nearly 44% from their 52-week high.

Undoubtedly, the biggest concern for Disney over the past two years has been the unpredictability of the COVID-19 pandemic. Pardon the pun on the theme parks, but it seemed like a merry-go-round of park closures and mitigation measures needed to combat COVID-19. The company’s most recent quarterly report mentioned closures in Hong Kong and Shanghai as having a negative impact on Disney Park’s revenue.

While closed theme parks are far from ideal, the growing consensus among researchers seems to be that we are past the worst of what COVID-19 and its variants have to offer. While it would be preferable if China’s response to COVID-19 cases were more in line with the rest of the world, the key point is that theme park disruptions are not a long-term problem.

Aside from Walt Disney finally overcoming the COVID-19 headwinds, Walt Disney continues to impress on the streaming front. At the end of its fiscal second quarter (April 2, 2022), Disney+ had 137.7 million subscribers, up 33% from the prior-year period. Average monthly revenue per global subscriber rose 9% from the second quarter of 2021, with the company citing strength in existing markets and retail pricing increases.

Another reason the House of Mouse makes for such a hassle-free investment is its pricing power. Disney has a massive library of original content that allows it to connect with people of all ages. Not to mention that the theme parks make everyone feel young again. Walt Disney has never had a problem passing on price increases to consumers and is therefore able to stay well ahead of the prevailing rate of inflation.

While Disney faces its fair share of near-term headwinds, its long-term future remains bright.

Leave a Reply

Your email address will not be published.