Although it’s generally good to be optimistic, the short-term financial outlook doesn’t look great unless economic circumstances change dramatically for the better.
Nevertheless, the red ink could represent a viable opportunity for buying long-term stocks.
You don’t want to simply buy anything you see that’s splashed with red ink. In many cases, publicly-traded equities suffer steep losses for fundamentally justified reasons. Besides, not all the best long-term stocks are laggards. In a few instances, the new paradigm may cause strong-performing securities to jump even higher.
Still, the vast majority of companies are seeing their valuations tumble. From the escalating crisis in Ukraine to global economic fears stemming from China’s zero-coronavirus policy to the stifling inflation rate, both business and consumer sentiment metrics are down. It may be time for the bold contrarian to start taking positions in long-term stocks.
At first glance, Chevron (CVX) doesn’t seem like an ideal company to wager on. For one thing, the fossil fuel industry has been falling well out of favor.
Certainly, soaring gasoline prices aren’t going to endear the sector to the everyday working individual. More importantly, Russia’s invasion of Ukraine has brought energy resilience and independence to the forefront.
European policymakers are accelerating their initiatives for clean and sustainable energy infrastructures. It’s a necessary discussion but one that may not yield meaningful results until years down the line. In the meantime, people need to pump gas into their combustion cars, which is why CVX may still be one of the best long-term stocks.
Electric vehicles may one day become the future of transportation. However, the market’s economic profile just isn’t compatible with present-day realities. Therefore, CVX may continue rising, whether we like it or not.
Although the legacy technology firm may be one of the most annoying names among long-term stocks to buy now, IBM (IBM) may finally come into its own.
It’s been a struggle for “Big Blue.” Weighed down by legacy business units, the company encountered significant difficulty keeping pace with innovations in the digitalization realm.
However, IBM today features strengths in myriad areas. From artificial intelligence to enterprise-level cybersecurity and even blockchain applications, IBM has a lot to offer. Of course, IBM’s acquisition of Red Hat has emboldened management’s plans to deliver next-generation hybrid multi-cloud solutions.
Fortuitously, the new paradigm makes IBM stock one of the most relevant growth stocks to buy now. AI may help fiscally challenged organizations “outsource” certain tasks to the machines.
For those seeking the best long-term stocks, Target (TGT) brings an interesting angle to the table.
First, as a big-box retailer, it serves many if not most customer needs. Since Target largely deals with core essentials, demand at its stores may grow as household budgets eschew discretionary spending.
Second, Target caters to a reasonably well-off consumer base. According to a Business Insider article, “Target’s average customer is a woman who is 39 years old, white, married, with a household income of $80,000.” TGT fits nicely between premium retailers and discount-bin fare, potentially making it a balanced investment.
In a similar vein to Chevron earlier, mentioning Toyota (TM) among the best long-term stocks to buy might seem anachronistic.
As you know, Toyota has a reputation for building combustion cars. They’re inexpensive, very efficient and reliable.
Nevertheless, they still suck hydrocarbons, which is a problem in the EV-focused environment.
The electrification of transportation may eventually occur but it’s not happening at this juncture. Especially since households purchasing EVs have an average income of roughly $140,000. The average transaction cost for new EVs is now $60,000.
That’s arguably just not realistic for most households, which means reputable car companies like Toyota have a new lease on life.
Also, let’s not forget that Toyota is an extremely innovative company. From robotics to hydrogen fuel-cell-powered cars to its own EV initiatives — along with research and development of solid-state batteries — TM is simply one of the names built for long road trips.
Advanced Micro Devices (AMD)
Semiconductor firm Advanced Micro Devices (AMD) has certainly seen better days.
Since the beginning of this year, AMD stock has hemorrhaged almost 37% of its market value. Thanks to a combination of the global supply chain disruption and volatility in the industries it serves, AMD is desperately struggling for traction.
It’s quite possible that AMD could fall even further as a result of global market volatility. However, if you’re patient, you might want to keep the specialty chipmaker on your radar.
For starters, AMD is a favorite among hardcore gamers, a business that will likely keep expanding as a result of its popularity with millennials and particularly Generation Z.
Second, AMD is an indirect play on the cryptocurrency sector due to the mining implications of its graphics processing units. Though the devastation of cryptos certainly hurt AMD, it’s unlikely blockchain-based assets will be deflated indefinitely.
Amazon (AMZN) has been snapping up lesser entities while expanding its reach to other relevant realms, most notably cloud computing.
For the first quarter of 2022, Amazon delivered its slowest year-over-year growth rate since 2001, with revenue rising 7% to $116.4 billion. Though this number was near expectations, earnings left much to be desired.
Against a consensus target for operating income of $5.3 billion, Amazon missed expectations by 30%, posting only $3.7 billion.
Naturally, stakeholders ran for the exits. To be fair, it’s not an unreasonable response, given that AMZN is now down nearly 33% year-to-date.
Nevertheless, e-commerce remains a powerful phenomenon, as is cloud computing, content streaming and all the other business categories Amazon has its tentacles in.
Digital payments processer and business platform PayPal (PYPL) is the riskiest name on this list of growth stocks.
PYPL has bled nearly 60% of market value year to date. That’s a staggering loss for such a powerful and relevant brand. Still, the economic backdrop is horrible for the company.
I don’t need to get into a who’s who of headwinds for PYPL stock. One of the biggest of course is soaring inflation. At some point, many businesses that use PayPal must raise their product prices to stay afloat. That may also cause customers to zip up their wallets, which in turn could drag down PayPal’s expansionary ambitions.
While the fundamentals may justify the red ink against PYPL, those with a patient outlook may want to consider it.
Mainly, the gig economy is blossoming and data indicates that more companies are exploring the use of a flexible workforce (as in independent contractors as opposed to employees). That should help get the ball rolling again for PYPL.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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