No matter how long you’ve put your money into the stock market, the past five months have been challenging.Since the beginning of the year, it has received extensive attention Dow Jones Industrial Average It is down 15% from its all-time closing high.benchmark S&P 500 The performance was slightly worse, with an intraday peak-to-trough drop of as much as 20%.
But it’s driven by growth stocks Nasdaq Composite (^IXIC 0.00%) That has been taken to the wooden shed.The Nasdaq is down 31% in the six months after hitting a new closing high, putting the index firmly in the bear market.
While bear markets can be scary because of their rapid declines, increased volatility, and poor investor sentiment, they are also is the best time to put your money to workAfter all, every big drop in the major stock indexes, including the Nasdaq, is eventually wiped out by a bull market rally.
As the Nasdaq plummeted, there were some absolute bargains. All investors need to get richer is to buy these screaming bargains and hold them for the next 10 years.
The first bargains snapped up during the Nasdaq bear market drop were FAANG stocks letter (Google 1.29%)(Google 1.10%)the parent company of internet search platform Google and popular streaming platform YouTube.
Despite a easing rally in the broader market last week, Alphabet shares had posted a 52-week peak-to-trough loss of 33% through May 24. Alphabet is an advertising-driven company, and advertising revenue tends to be one of the first things to take a hit when economic growth slows or the U.S. economy slips into recession. With the Fed intent on keeping inflation under control – and willing to raise interest rates quickly to do so – some cooling in the economy is expected.
However, with a short-term stagnation expected in the U.S. economy when a company like Alphabet offers three distinct competitive advantages, there’s no reason to be afraid to wait and see.
First, Internet search platform Google is a veritable monopoly. Data from GlobalStats shows that Google has 91% to 93% of global search share in the past two years. Playing such a dominant role in global search gives Alphabet excellent pricing power when it comes to ad placement.
Second, YouTube has become the second most visited social media site on the planet, with an estimated 2.2 billion monthly active users. Not surprisingly, Alphabet has been able to translate that interest into steady ad growth and a high-margin YouTube premium membership.
Third, Google Cloud ranks third globally in terms of cloud infrastructure spending. Even with weak first-quarter ad sales, Google Cloud sales rose 44% from a year earlier. It’s fair to say that cloud infrastructure is still in its early stages of growth.More importantly, cloud-based operating margins Should be significantly higher than ad-based operating margins Over time. That means Google Cloud could double Alphabet’s operating cash flow per share as early as 2025.
Over the past five years, Alphabet’s cash flow has averaged 19 times its cash flow. Opportunistic investors can now buy shares at nearly 8 times projected 2025 cash flows.
With the Nasdaq in a bear market, another absolute bargain to buy and hold for 10 years is furniture stocks This lovesack ltd. (Love 1.19%).
I don’t know about you, but just saying the phrase “furniture inventory” is usually enough to make me sleepy. Most furniture chains rely on brick-and-mortar foot traffic and buy from a small group of wholesalers. It’s a pretty boring industry, ripe for disruption, and that’s where Lovesac comes into play.
Lovesac is a designer and retailer of modular furniture. Although it was originally known for its bean bag chairs (“sacs”), Nearly 88% of Lovesac’s revenue now comes from its sales division (as the company calls its division). These modular sofas can be rearranged dozens of ways to fit almost any living space.
What makes actionals so appealing is that Customizations and options involved, and their eco-friendly buildings. Sactionals have over 200 different cover options, which means they can use any color or theme at home. They also have many upgrade options, including a wireless charging station and a built-in top-of-the-line surround sound system. But probably the best part about sactionals is that the yarn they use in their production is made entirely from recycled plastic water bottles.
Although historically high inflation worries investors retail stocks, Lovesac shouldn’t feel a sting compared to most retailers. That’s because its furniture prices tend to be on the high side. Since the company’s core customers are typically upper-middle-income earners, inflation shouldn’t have a major impact on its buying habits.
Another factor that sets Lovesac apart is the Omni-channel sales platformWhen the pandemic hit, Lovesac was able to move about half of its sales online. Although the company has 146 retail stores in 39 states, the company typically has lower operating costs, including online sales, pop-up showrooms and branded in-store and online partnerships. The end result is higher profit margins than traditional furniture stocks, and – so far – much faster growth.
Right now, Lovesac stock is buying at just 8 times Wall Street’s forecast earnings for fiscal 2023, even as the company’s annual sales growth remains above 20%.
The third absolute bargain that investors can safely buy now and hold for the next 10 years is social media stocks Pinterest (pin -3.91%).
Right now, Pinterest is facing a double whammy. First, its monthly active user (MAU) numbers have been declining over the past year. Wall Street typically sees declining MAUs as bad news for engagement-driven social media companies. Another concern is the growing likelihood of the aforementioned economic slowdown or recession. Like Alphabet, Pinterest is primarily an advertising platform.
Although both of these disadvantages are tangible, Neither pose a threat to Pinterest’s long-term growth prospects.
For example, Pinterest’s MAU fell from 478 million in March 2021 to 433 million in March 2022, which can be explained by the rise in COVID-19 vaccination rates. As life returns to normal, people stop spending as much time online. However, if you ignore the initial MAU popularity and subsequent decline during the pandemic, and expand the scope of user growth to the past five years, you see a steady upward trend in monthly active users.
From an investment standpoint, more important than the number of active users on the platform is the Pinterest’s ability to monetize existing users. In this regard, there is no problem. Despite a 9% year-over-year decline in MAU, global average revenue per user (ARPU) increased 28% in the first quarter compared to the same period last year. This ARPU data shows that advertisers are willing to pay to reach out to Pinterest’s growing shopper base.
Another point to consider for Pinterest is its unique operating model.However appleiOS privacy changes affecting data tracking have Wall Street worried about ad-driven social media companies, and Pinterest appears to be barely affected by the privacy shift. That’s because it doesn’t have to rely on “likes” to help advertisers target users. The whole premise of the Pinterest platform is to make users willing to share the things, places and services they love.this Allow businesses to precisely target users with their products and services.
What investors get from Pinterest is a company that can sustain 20% annual revenue growth and can buy at around 18 times Wall Street’s 2023 earnings forecast. It’s a cheap deal for a company that should be somewhat immune to the downside. social media stocks.