It’s no secret the stock market is becoming more volatile. Although most major stock indices are up by double-digit percentages in 2023, we’re seeing wilder price swings on almost a daily basis. In fact, the Nasdaq Composite index is almost in correction territory.
After rebounding sharply from last year’s dismal performance, the growth-oriented index is down 9% since the end of July and trending lower. This isn’t a problem; it’s an opportunity. Smart long-term investors will see the decline for what it is: a chance to buy good companies at discounted prices.
History shows the stock market always recovers from steep sell offs. That means a double-digit downturn is exactly when investors should swoop in. Especially when its deep bargain value stocks to buy.
What follows are three value stocks you don’t want to miss as the Nasdaq slides lower.
Innovative Industrial Properties (IIPR)
Real estate investment trust (REIT) Innovative Industrial Properties (NYSE:IIPR) consistently demonstrates its resilience and value in the cannabis industry. With shares down 36% from their 52-week high, the marijuana-focused REIT represents a compelling value proposition.
Instead of growing marijuana itself, Innovative Industrial specializes in leasing properties to medical cannabis companies. The REIT owns 108 properties across 19 states with approximately 8.9 million rentable square feet that operate under long-term, triple-net leases exceeding 15 years.
Because tenants pay for insurance, taxes, structural repair, and maintenance, it removes a considerable expense from the REIT. It also ensures Innovative Industrial enjoys reliable, consistent rental income, which reduces operational risks for investors.
Arguably medical marijuana’s runway is longer than that for recreational use legal cannabis. As demand for cannabis-related facilities rises with further legalization efforts, Innovative Industrial is strategically positioned to benefit.
The stock is in a deep hole that appears to be a market overreaction, given the REIT’s solid financial performance and dividend track record. Like all REITs, it is required to pay out most of its profits as dividends. The payout currently yields 9.1% annually. Since its IPO in 2016, the marijuana REIT raised the distribution at an eye-watering 42% compounded annual growth rate. It’s not likely to maintain that torrid pace, but the stock’s discounted value presents an attractive entry point for investors seeking undervalued assets with growth potential.
PayPal (PYPL)
Shares of leading digital payments and fintech stock PayPal (NASDAQ:PYPL) continue to flirt with new 52-week lows. Growing competition raises concerns it will lose significant market share if it is not nimble enough to respond. While the worries are not exaggerated, the selloff in the stock is. And though analysts may have unrealistic stars in their eyes with the company, several factors make PayPal an attractive investment, even after a 38% decline in its stock value.
First, PayPal’s core business remains strong. It boasts a massive user-base and a vast network of merchants, making it an integral part of the global payments ecosystem. There are 431 million active accounts, up from 429 million a year ago (although down slightly sequentially).
The shift towards digital payments and the increasing adoption of e-commerce are long-term trends that continue to benefit PayPal. On a currency adjusted basis, net revenue rose 8% in the second quarter as total payment volumes surged 11%.
Furthermore, PayPal’s is committed to innovation. Last month it became the first major U.S. fintech stock to offer its own crypto token. PayPal USD is a dollar-pegged stablecoin, which it believes “are the killer application for blockchains right now.”
PayPal’s solid financials, positive cash flow, and consistent revenue growth indicate a healthy and stable company. As the fintech landscape continues to evolve, PayPal is well-positioned to thrive, making it an attractive choice for long-term investors.
Trupanion (TRUP)
It’s hard to underestimate the inexorable growth potential of the petcare market. It makes pet insurance leader Trupanion (NASDAQ:TRUP) an irresistible opportunity for value stock investors.
The pet insurance industry is poised for significant growth. As more people consider their pets beloved family members, the demand for comprehensive pet insurance coverage is rising.
The American Pet Products Association says consumers spent $138.6 billion on pet care last year. Insurance is an area that is only just gaining traction and Trupanion is one of the biggest players. It stands to benefit from this growing trend.
Trupanion’s subscription-based business model generates steady and recurring revenue, which can provide stability even in uncertain economic conditions. Pet owners pay monthly premiums, ensuring a consistent cash flow for the company. Revenue is up 18% year to date to $527 million.
The problem is inflation. Higher prices are driving up the cost of veterinary care, causing Trupanion to raise rates and hurting its bottom line. It also has a history of losses. Despite generating nearly $1 billion in revenue last year, it produced $44 million in net losses.
However, Trupanion has consistently demonstrated a commitment to innovation in the pet insurance space. It leverages technology to streamline claims processing and enhance customer experiences.
That makes the pet insurance company an alluring investment opportunity with its stock at pandemic-era levels. Thanks to its industry leadership, a subscription-based revenue model, and a commitment to innovation, Trupanion’s potential for growth and value recovery makes it a stock well worth considering for long-term investors.
On the date of publication, Rich Duprey did not hold (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.
