Investors haven’t been looking for S&P stocks to buy since the market’s decline this year. After peaking at around 4,800 the S&P 500 is barely avoiding new lows.
Markets are bracing for hyper-inflationary rates to pressure the Federal Reserve to raise interest rates 50 basis points at a time.
Investors who take a very long-term view of the S&P 500 will treat the current downtrend as a blip when looking for stocks to buy. In the last decade, the index bounced back and found new highs. This time is no different. The central bank will eventually slow the economy down enough to stabilize inflation rates.
In addition to investing steadily in the S&P 500 index, investors may pick seven of the best stocks. Many of the top stocks to buy for an S&P rebound are in the technology sector, but there are other companies worth a close look as well.
The supposed imminent recession sent shares of Amazon.com (NASDAQ:AMZN) to below $104 (adjusted for the 20-for-1 stock split on June 6) briefly last month before it rebounded. The split alone puts Amazon among the best stocks to buy as retail investors have more and easier access to the new “lower” price.
Investors are confident that the e-commerce giant will thrive despite economic slowdown risks. Consumers will manage their spending carefully. They will visit online stores that help them save money. Amazon will leverage its low-cost fulfillment capabilities, passing its savings to customers.
Six months ago, markets did not worry about Amazon’s prospects when they should have. Now that AMZN stock is below its split-adjusted $188 52-week high, investors should look at its upside optimistically.
The company has a low debt-to-equity of 0.53 times. Its forward price-to-earnings multiple is at historically low levels. The company will remove major uncertainties when it re-adjusts its hiring levels to align with lower demand and book impairment charges.
The increased liquidity may increase its stock volatility. In the second half of the year, markets should expect better consumer discretionary spending. Amazon will run its promotional Prime Day next month. It will have a back-to-school and holiday shopping seasonal lift next.
Markets discounted the valuation of Apple (NASDAQ:AAPL) shares since its peak in December 2021.
Investors are worried that the company will sell fewer expensive iPhones as consumers grapple with inflation. Apple has a supply constraint, not a demand decline. It has billions of dollars worth of sales delayed because of China locking down Shanghai for over two months.
Shanghai is slowly reopening, a process that started on June 1. Apple will guide investors to stronger sales in the second half of the year. This should help AAPL stock from here.
In addition, its services revenue should get strong support as App Store sales recover. Users are unlikely to cut app spending in inflationary times. App prices are too low for consumers to consider.
Among the reasons it is one of the best stocks to buy is that Apple plans to launch augmented reality and virtual reality products. This will re-ignite its product mix. It will diversify the company’s hardware lineup away from smartphones, tablets, computers and smartwatches.
More importantly, users may choose Apple’s AR/VR product over that offered by Meta Platforms (NASDAQ:FB).
Applied Materials (AMAT)
Applied’s fabrication equipment market will run at around $100 billion levels, it benefits from strong demand. In 2023, the company will execute its long-term capacity and technology roadmap.
Investors are ignoring the persistently strong demand in the years ahead. While the stock underperforms on the market, shareholders get a dividend worth $1.04 a share annually.
Inflation will increase input costs, which Applied Materials may pass on to customers if needed. It will protect its operating margins as it continues selling fabrication equipment to the memory chip suppliers.
Markets are unwilling to look beyond the supply chain constraints that hurt this company’s third-quarter outlook. This miscalculation makes it one of the more intriguing stocks to buy for the long term. Investors should ignore the temporary slowdown. Instead, expect growth to resume as the constraints ease in the quarters ahead.
Costco Wholesale (COST)
Costco Wholesale (NASDAQ:COST) posted net sales growth in the double-digit percentage for. Its e-commerce unit grew at a faster pace. In the month, total company sales grew by 11.7%. E-commerce sales rose by 34.4%.
The strong results are impressive, considering Target (NYSE:TGT) and Walmart (NYSE:WMT) posted weak quarterly results. COST stock fell as a result of the bad news from competitors, which makes it one of the more solid stocks to buy on the dip.
To save more money, customers are likely to renew their Costco membership. Renewal rates and membership growth are two trends that shareholders will watch closely. Fortunately, the customer’s urgency to maximize savings should drive membership growth figures in 2022.
Energy inflation will pressure Costco’s expenses. The company will have expense control measures in place to offset gross margin pressures.
For example, it may manage inventory levels to align with customer demand. It also has the option to raise membership rates to offset the impact of higher energy costs.
This headwind has no effect on its business or its business model. The software firm has multiple catalysts to sustain its growth rates.
Power Apps cater to the mass market. It strengthens Microsoft’s platform by fueling demand. Corporations will need a cloud-based solution by relying on Microsoft’s Azure. Furthermore, they would continue subscribing to the Office software. Customers have no alternative to Office’s functionality and convenience of use.
When times get hard, corporations will need to consolidate their vendor list. They could switch to Microsoft for security, productivity solutions and other cloud offerings.
Since Microsoft offers a superior product, it does not need to give discounts. Providing a profit moat like this makes it among the most stable stocks to buy. This will preserve its healthy profit margins.
In the virtual office space, Microsoft offers Power Teams. Users, who logged onto Microsoft 365, may have Teams meetings while seamlessly using other productivity-related solutions.
It posted revenue of $7.41 billion, up by 24% year over year. For Q2/2023, Salesforce expects revenue of between $7.69 billion to $7.70 billion, up by 21% year over year. For the full year, it expects revenue of up to $31.8 billion.
Customer demand for Salesforce is rising because of new feature introductions. For example, its engineering team introduced Revenue Intelligence last year. This integrates Tableau and its Sales Cloud. Sales teams have a more efficient way to collect cash quickly.
Salesforce increased its operating margin to 20.4% by unlocking efficiencies across the entire business. Each leader prioritized investments. This resulted in a higher return on investment.
With a tight staff-hiring environment, the company is approaching it at a steady pace.
For example, Salesforce increased resources in customer support first. This ensures its clients get the best support. This strategic investment will lead to higher renewal rates and bigger contracts in the future.
Walt Disney (DIS)
Walt Disney (NYSE:DIS) offers investors the best of both worlds. The theme parks around the world will benefit from the post-covid reopening.
People who demand online content will subscribe to Disney+. Those who are sensitive to prices could sign up for an ad-supported version at a lower monthly subscription rate.
In the second half of the year, Disney’s streaming service will have new content. It will expand to new markets, increasing its revenue potential. Disney allocated billions to grow its content. As its movie offerings improve, the service will increase its market share. Investors should consider avoiding its competitors and look at DIS stock instead.
The company is willing to run Disney+ at a loss for a few years. It needs to build a strong subscription base before focusing on profitability next.
In the near term, investors should brace for a revenue disruption for Disney’s theme parks. Covid restrictions and lockdowns in Hong Kong and Shanghai, respectively, will weaken attendance. Now that those disruptions are unwinding, revenue in the second half should recover.
On the date of publication, Chris Lau 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.