The recent volatility in the markets appears to be easing a bit. That’s not to say the main driver of it, the Federal Reserve’s plans to raise interest rates, won’t continue to have an impact. But with stocks, electric vehicle (EV) and tech plays in particular knocked down so much, so fast? It may be time to decide which stocks to buy, as the dust temporarily settles.
For many of the names pushed lower by rate hike concerns, the sell-off was justified. That is, there was some semblance of sense to their sky-high valuations in a near-zero interest rate environment. As monetary policy starts to make its own “return to normal,” these valuations are unsustainable.
Yet in the case of some reasonably priced names? What played out last month may have been a bit of an overreaction. Pushed to prices that underestimate their respective long-term potential, investors focused on the long-term may want to scoop some of these up, while they remain at opportune entry points.
So, what are some of the stocks to buy, as the sell-off ends, at least for now? These seven, a mix of growth and value plays, are solid plays for those who can look past near-term uncertainties:
- eBay (NASDAQ:EBAY)
- Ford (NYSE:F)
- Fisker (NYSE:FSR)
- GAN (NASDAQ:GAN)
- Intel (NASDAQ:INTC)
- SoFi Technologies (NASDAQ:SOFI)
- AT&T (NYSE:T)
Stocks to Buy: eBay (EBAY)
While not one of the hardest hit by last month’s tech sell off, EBAY stock has experienced a moderate pullback since the start of January. This is atop the slide in price it experienced during November and December.
In all, at around $58.50 per share today, the online auction marketplace operator is down around 27% from its 52-week high.
Again, with rates rising, it makes sense that tech stocks with high valuations have come down in price. But eBay’s forward multiple is far from frothy. In fact, trading for around 15.4 times projected 2021 earnings, you can say it’s a value play. Sure, it makes sense that this more mature internet stock sports a lower price-to-earnings (P/E) multiple.
Even so, given the moderate level of earnings growth expected this year, and in 2023? Its clearly undervalued. Initiatives like managed payments, a product of it weaning off its former subsidiary PayPal (NASDAQ:PYPL), as well as stock buybacks, are helping the company deliver earnings per share (EPS) growth that exceeds its single-digit sales growth.
Going forward, eBay may not necessarily go on a hot run once sentiment for shares improves. Yet the ingredients are in place for it to deliver solid returns in the years ahead. You may want to buy it while it remains down from its extended pullback.
Ford’s move into EVs has been the main driver for its stock price over the past year. It has also played the main role in this incumbent automaker’s big drop, as investors have made a big exit out of vehicle electrification plays.
Many EV stocks, like Lucid Group (NASDAQ:LCID), Rivian (NASDAQ:RIVN), and Tesla (NASDAQ:TSLA) have moved up too far, too fast. Adoption of electric cars and trucks may be accelerating. Whether that justifies the rich valuations these three pure plays continue to command remains up for debate.
With F stock, however, valuation is less of a concern. It’s still priced more like an “old school” auto stock, at 11.2x earnings. You are getting exposure to the EV megatrend at a more than fair price. Not to mention, you are getting indirect exposure to RIVN stock as well. An early investor in Rivian, this company owns around 12% of it, a position worth around $7.5 billion.
Going forward? It’s still plugging along with bringing out electrified versions of its popular vehicle models. Ford is also rumored to be planning to spin off a small portion of its EV business. A move like this could unlock value for shareholders. At around $21 per share today, down slightly from its recent high, consider this one of the best stocks to buy after the market’s recent correction.
Stocks to Buy: Fisker (FSR)
Buying F stock appears to be one of the safer stocks to buy to add EV exposure to your portfolio. But what if you’re looking for something more of the high-risk, high-return variety? With other early stage electric vehicle plays, downside risk may exceed upside potential.
In the case of Fisker stock, though, risk/return appears favorable. It has a $3.5 billion market capitalization at today’s prices (around $12 per share). There’s a lot less potential growth already baked into its stock price. Now, that makes some sense, given the company isn’t targeting six figure delivery numbers within a few years, like Lucid and Rivian are.
Still, even if Fisker finds moderate success with its EV offering, an SUV known as the Ocean, there may be plenty of room to grow its valuation. By comparison, Lucid and Rivian need to hit their ambitious growth goals just to sustain their valuations.
With the market’s lukewarm feelings for FSR stock, and more muted enthusiasm for EV stocks overall, patience may be key. It may take some time for it to re-hit the highs reached during past waves of “EV mania.” There’s of course the risk too that the Ocean is a dud once it makes its debut later this year. Nevertheless, after its sharp drop during the January wave of panic selling, it may be at a price where the odds with this risky EV play are in your favor.
The rate hike sell-off has hit growth stocks across the board. As I mentioned above, EV stocks and more general tech stocks have been hard hit. So too, have online gambling plays. With the big shift from overly bullish to overly bearish, many bargains can be found in this space. But one in particular that’s worth a look is GAN stock.
Not familiar with GAN? That’s understandable. This online gambling doesn’t operate a sportsbook, which explains its lack of name recognition. Instead, it’s a provider of back-end technology for the sportsbooks industry. In a way, with its SaaS business model, you can think of it as sort of like the sports betting industry’s equivalent to Shopify (NASDAQ:SHOP).
When sports betting and i-gaming stocks were in vogue, this previously over-the-counter (OTC) listed stock took off, once it uplisted to the Nasdaq Capital Market. Over the past year, though, as investors have become more skeptical about projections of high growth for the industry, shares in this name have tanked.
Following the latest gambling stock rout, this former $30 stock now trades in the high single-digits. Still operating in the red, it doesn’t pop out as a value play on a stock screener. Yet with management confident it can turn this business (currently generating between $125 million and $135 million annually) into a $500 million per year business by 2026, you may want to give it a closer look.
Stocks to Buy: Intel (INTC)
Despite its relatively low valuation, the recent tech sell off, driven by rate hikes, has put pressure on INTC stock. So too, has the chip maker’s latest guidance update. A mixed outlook was met with a negative reaction by investors. However, much like the other value names in tech, this may be another where the market has overreacted.
Why? For starters, while guidance fell below expectations, Intel’s earnings for the December quarter came in ahead of estimates. This may be the first sign that it’s turnaround, which CEO Pat Gelsinger has conceded could take as much as five years, is working. The company’s game plans, which includes it investing $100 billion into new plants, in order to become a major foundry for other chip makers, isn’t without risk.
Yet if it works out, it could enable the company to regain ground lost over the past few years. Along with getting its manufacturing house back in order, Intel’s plan to take its Mobileye unit public, while keeping a majority stake, could boost shares as well. With this unit alone worth $50 billion, it may be able to convey to investors that the company as a whole is worth more than its current $198.8 billion market capitalization.
Just announcing it’s raising its dividend as well, this 3% yielding stock also pays out while you wait for the Intel turnaround to complete. Put it all together, and this is another one of the best stocks to buy after last month’s meltdown.
SoFi Technologies (SOFI)
Before, I’ve recommended to wait and buy SoFi Technologies, if/when a rate hike sell-off sends it down to single-digit prices. A drop on the heels of rising interest rates did happen, yes. But with news of it obtaining a bank charter softening the blow, this fintech stock has managed to stay above $10 per share.
In light of the bank charter development, and the fact the prospect of higher rates has been factored into it? I’ve tweaked my prior take on SOFI stock a little bit. Now that the uncertainty as to whether this digital first financial services firm would become a licensed bank has cleared up, it may have already found its floor.
Sporting a high valuation due to projections of it continuing to grow at a fast clip, you may be surprised I’m bullish. After all, aren’t rising rates going to have further impact on stock market valuations? On one hand, this is true. On the other hand, rising rates may help SoFi more than they hurt it. As it morphs into more of a traditional financial institution, rising rates may be in its favor, as they help make banking more profitable.
Stronger than expected results, plus a faster trip to overall profitability, may help outweigh the risk of multiple compression from rising rates. With this in mind, keep an eye on SoFi as it bounces back from its lows.
Stocks to Buy: AT&T (T)
Still perceived as a “widows and orphans” stock, recent market volatility has only done minimal damage to the price of AT&T shares. However, there has been a recent development that may dampen interest in it for now.
That would be its just-announced plans to spin-off rather than split-off the Warner Bros. Discovery shares it’ll receive, once it merges its WarnerMedia unit into Discovery (NASDAQ:DISCA). Investors were hoping for the latter rather than the former. Why? A split-off of shares would’ve limited the extent of “Ma Bell’s” post-divestiture dividend cut.
Going the spin-off route, the T stock dividend is getting a severe haircut. Instead of paying out $2.08 per share in dividends annually, going forward its annual payout will be $1.11 per share. That translates into a drop in its yield from 8.52%, down to around 4.5%.
Income investors are not happy. That’s why shares, after their rebound from December through mid-January, are back below $25 per share. Yet as InvestorPlace’s Louis Navellier recently argued, the heavy amount of attention around its payout means the market is underappreciating its potential as a turnaround play. Both T stock and its spinoff could make comebacks down the road. Trading for just 7.8x earnings, investors buying it after its recent drop could see nice returns, albeit with a lower amount of dividends.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.