What seemed an auspicious start to market proceedings last week ended in a mess of red ink, though this dynamic also serves to support certain stocks to buy to make the most out of recent volatility. Earlier on Dec. 13, CNN reported that inflation cooled more than expected. Of course, this framework set the stage for the Federal Reserve to cool its hawkish monetary policy.
However, on the next day, the central bank raised the benchmark interest rate by 50 basis points. True, this figure came in below the usual 75-basis-point rate hike. However, the decision also demonstrated the Fed’s commitment to tackling inflation through tightening liquidity. In other words, it wants fewer dollars chasing after more goods.
Then, Thursday, Dec. 15 happened. Key retail spending numbers slipped against prior norms, indicating that consumer inflation began taking its toll. In turn, the equities sector melted down. In addition, the fallout continued into Friday. Nevertheless, for those that are seeking stocks to buy on discount, the red ink might be a welcome sight. To be fair, contrarianism presents extraordinary risks. And most of these ideas involve a high probability of volatility. Still, if you can handle it, these are the stocks to buy based on recent market fear.
|Sonida Senior Living
Based in Australia, BHP (NYSE:BHP) has been on a roll throughout much of 2022. On a year-to-date basis, shares gained nearly 14%. However, the volatility stemming from recessionary fears impacted shares, putting a stop to their recent rally. Although BHP still gained over 4% in the trailing month, in the past five sessions, it slipped more than 3% of equity value.
Nevertheless, those that have a long-term view on global markets should consider BHP as one of the stocks to buy. Fundamentally, the metals and mining firm targets several key commodities. One of them is nickel, which will play an important role in the electric vehicle rollout. Thanks to its higher energy density and greater storage capacity, nickel represents an indispensable commodity for next-generation batteries.
As well, BHP presents an attractive value proposition. Currently, Wall Street prices shares at 5-times trialing-12-month earnings. In contrast, the sector median is 11.9 times. Thus, it makes for a solid discounted amid this market fear.
Royal Gold (RGLD)
In theory, Royal Gold (NASDAQ:RGLD) shouldn’t perform that well because of the underlying asset. Usually, investors acquire gold-related securities when they anticipate rising inflation. Currently, we are in an inflationary environment relative to recent pre-pandemic norms. However, if the Fed continues to raise the benchmark interest rate aggressively, you’ve got to imagine that deflation may become a reality someday, adding to the market fear.
Though it’s not a brilliant performance by any means, RGLD gained nearly 4% YTD. In contrast, the benchmark S&P 500 index lost nearly 20% during the same period. Generally, analysts consider a 20% loss as a threshold for entering bear market territory. That said, recent market pressures stunted Royal Gold’s upside momentum. In the trailing five sessions, RGLD declined 1%.
Still, contrarians can make the argument that RGLD now represents one of the stocks to buy on discount. While ongoing inflation might not be in the cards, the fear trade certainly rings loudly.
Based in Brazil, petroleum specialist Petrobras (NYSE:PBR) suffered from two main headwinds. First, the company’s home nation incurred many troubles over the years. And this year, Brazil had to endure a contentious and chaotic election cycle. Second, concerns ring high about the state of the hydrocarbon energy market. With western powers determined to penalize Russia for its invasion of Ukraine, the sector features significant ambiguities.
Indeed, up until late October to early November, Petrobras returned solidly positive figures for shareholders. However, the combination of internal politics and geopolitics clouded the narrative for PBR stock. During the trailing half-year period, shares plunged over 19% of equity value. And in the past five sessions, PBR absorbed a near-9% loss.
However, with social normalization trends rising throughout the globe, consumption of hydrocarbons may increase. Therefore, irrespective of various measures to penalize Moscow, the energy market may likewise rise. Ahead of this circumstance, you may want to consider PBR as one of the stocks to buy on market fear.
Warby Parker (WRBY)
Specializing initially as on online retailer of prescription glasses, contact lenses, and sunglasses, Warby Parker (NYSE:WRBY) expanded to brick-and-mortar stores. Per its public profile, the company features approximately 160 physical storefronts across the U.S. and Canada. One of the more highly anticipated initial public offerings last year, circumstances have not panned out for WRBY stock.
Since Warby Parker’s first public close – which to be clear is different from its initial offering price – shares hemorrhaged 73% of equity value. From the beginning of this year, WRBY dropped a staggering 68%. What’s interesting, though, is that during the trailing half-year period, WRBY gained nearly 7% of value. It was going strong until the last week’s market fallout. In the past five sessions, WRBY cratered nearly 13%.
To be 100% transparent, some will argue (convincingly) that Warby Parker deserves its crimson stains. It features middling stability in the balance sheet and negative TTM profit margins. But on a cynical basis, the underlying global myopia trend will likely exacerbate. Thus, WRBY may be one of the relevant stocks to buy amid the market fear discount.
Lucid Group (LCID)
EV manufacturers haven’t enjoyed a strong year in 2022 and Lucid Group (NASDAQ:LCID) unfortunately provides no relief. Initially billed as a luxury rival to Tesla (NASDAQ:TSLA), Lucid definitely made things interesting in the space. While the former company undoubtedly dominates the EV market, the vehicles themselves risk getting bland.
For you horologists out there, EVs are like the quartz-powered watches of personal vehicles. Nothing beats the accuracy of a quartz watch in the same way that nothing beats the rapid-fire acceleration of a high-performance EV. However, quartz watches are essentially soulless – just like an EV. You’ve seen one, you’ve seen them all.
In the market, LCID lost nearly 14% of equity value. However, it might make for one of the stocks to buy for contrarians. The Lucid Air received the title of 2022 MotorTrend Car of the Year, adding some much needed vigor to the bland EV space. Thus, if you have the patience, LCID could be interesting as a discounted pickup amid the market fear.
Sonida Senior Living (SNDA)
Headquartered in Dallas, Texas, Sonida Senior Living (NYSE:SNDA) provides no ambiguities about what it does: an operator of senior living communities and assisted living centers in the U.S. Fundamentally, senior care centers attracts because of demographic and mathematical realities.
According to the Pew Research Center in November 2020, “[m]illions of Baby Boomers retire each year from the U.S. labor force. But in the past year the number of retired Boomers increased more than in prior years.” As representatives of the largest population boom in U.S. history, this demographic will now require massive care. Further, with people capable of living longer due to advancements in healthcare, younger folks may be on the hook for a long time.
Cynically, then, Sonida may enjoy cynical relevancies. In the trailing five sessions, SNDA dropped 20% of equity value. Though the fundamentals present an attractive perspective, prospective investors should also realize its financials are messy. Therefore, consider SNDA as a speculative trade among stocks to buy on market fear.
FAT Brands (FAT)
For those that want to take their contrarian stocks to buy to the extreme, FAT Brands (NASDAQ:FAT) might deliver an intriguing take. Best known for its Fatburger fast-food joint – followed perhaps by Johnny Rockets – FAT Brands may benefit from cynical tailwinds. Essentially, the company offers cheap escapism.
Scientifically speaking, the consumption of junk food triggers neurons to pump out more dopamine. This framework creates sensations of pleasure. When faced with a possible economic crisis, the need for dopamine will likely rise.
Not only that, FAT Brands provides this fix at a relatively cheap cost. Sure, cheaper alternatives exist, meaning that the company isn’t totally immune from the trade-down effect. However, as societal pressures build from macro headwinds, FAT could see increased demand. Therefore, its sharp loss of nearly 46% YTD might be an opportunity. Still, FAT doesn’t necessarily own the best financial profile (though it’s a long-term growth machine). If you can handle the wildness amid this market fear, FAT could be worth a look for gamblers.
On the date of publication, Josh Enomoto 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.