This S&P 500 On the cusp of entering a bear market, defined as a 20% drop from its most recent peak. While bear markets can be brutal, they often provide an opportunity to buy high-quality companies at more attractive valuations.
With an eye toward opportunity, we asked some contributors what their stocks are bear market Watch list.That’s why they focus on steel producers steel dynamics (STLD 4.03%)waste and recycling companies West Malaysia (West Malaysia 1.91%)and Lithium Mining Company Albemarle (ALB 6.22%) See if the bears finally get them to buy.
Ruben Gregg Brewer (Steel Dynamics): When it comes to steel mills, industry giants Nucor Often considered one of the best. The co-founder and CEO of Steel Dynamics worked at Nucor before starting his own company. Not surprisingly, the script he uses is very similar to that used by Nucor.
For example, Steel Dynamics uses an eclectic arc mini mill, which is more flexible than older blast furnace technology. The company is vertically integrated, with scrap operations (a key steelmaking input), steel mills and manufacturing operations. The last grouping is important because it allows Steel Dynamics to charge higher prices for its products, thereby increasing profits. All of this is pretty much the same reason Nucor has been so successful, including an incredible 49 consecutive years of annual dividend increases.only one year away Dividend King Although steel is a height Cyclical industries.
So why not just buy Nucor? Well, Steel Dynamics is a much smaller company and is still growing rapidly.For example, its dividend has been “just” continuous for 12 years (this is dividend recipient), but the annualized dividend growth rate over the past decade has been an impressive 10%. For reference, Nucor’s dividend growth rate was in the low single digits during this period. Given that the steel market is doing well, the stock is a bit pricey today. But when Steel Dynamics’ stock price starts to fall, dividend growth-focused investors should start taking a serious look.
I would love to go dumpster diving and buy this stock
Matt DiLallo (West Malaysia): Investors have been bidding for shares in collection and recycling company WM for years. The company currently trades at nearly 35 times its earnings and about 15 times cash flow from operations, both historically high multiples. Because of this, its dividend yield has fallen to its lowest level in years, at around 1.5%. That’s despite increasing spending for 19 consecutive years, including a 13% increase last year.
While I love the company — it’s growing steadily and returning cash to investors — I haven’t added to my position over the years because it’s just too expensive for me. However, if the bears push it lower, I’ll put it on my watch list. When the stock tumbled early in the pandemic, WM’s stock briefly traded at a more attractive valuation, trading below 24 times earnings, below 10 times cash flow from operations, and offering a dividend yield of nearly 2.4%. I missed the chance to add it at the time, so I don’t mind another chance.
Besides the steady cash flow from the collection, disposal and recycling business, another factor I like about WM is its Investment in Renewable Natural Gas (RNG). WM plans to spend $825 million to expand its RNG production by 600% by 2025.The investments will capture methane from its landfills, power its entire fleet, and provide 1 million homes Renewable Energy. This will save money, increase revenue and reduce carbon emissions.
While there’s no guarantee that WM stock will plummet in a bear market — even though WM’s stock is down nearly 20%, it’s still 7% below its peak recently. S&P 500 — If the bear market makes it a lot cheaper, this is a stock I’d love to buy.
A solid stock in a booming industry
Nehacha Maria (Albemarle): Electric vehicle (EV) sales are Grow at lightning speed, I wouldn’t be surprised if nearly every growth investor owns an EV stock. Of course, it hasn’t been smooth sailing for many EV makers, especially start-ups, but the industry’s supply side is taking a big hit as demand for EVs surges around the world.
Prices of batteries and basic raw materials used to make electric cars and batteries are skyrocketing, which may explain why stocks like Albemarle up In the past three months at the time of writing, the S&P 500 has fallen 12% from its peak to 27%. So whenever there’s a bear market and Albemarle stock gets washed out, if you’re bullish on electric cars, it’s a good time to consider buying it.
Albemarle is one of the largest lithium mining companies in the world. Most of the batteries that power electric vehicles today are lithium-ion batteries, so it’s safe to say that Albemarle is in the right business at the right time.The company recently delivered stellar numbers in the first quarter, with its Lithium sales surge 97% Year by year. Albemarle also raised its 2022 sales guidance, buoyed by lithium prices that are only expected to rise further.
In fact, its end markets are so strong that Albemarle just raised its guidance again, or twice in just three weeks. Albemarle also sells bromine and catalysts, but the lithium business currently brings in nearly half of its revenue. You’ll also be surprised to learn that Albemarle has increased its dividend for 28 consecutive years.Even though its dividend yield is sub-1% and minuscule, its earnings and dividend growth should pay off Big returns for investors snapping up lithium stocks in the heat of a bear market.