Over the long term, the stock market favors the bulls. Any long-term chart of the S&P 500 would highlight that realization. But when bear markets come around, they are fast, furious and painful. Eventually they end though, and that leaves a number of bargain stocks to buy before the bull market returns.
The problem? Investors never truly know when the bottom will come or at what price it will be.
That forces investors to either follow the technicals — which say to stay away — or the fundamentals, which can be misleading at times. It’s when investors must double down on their time, energy and researching resources to pin down quality stocks.
In many of these cases, bargain stocks to buy before the bull market returns will eventually perform well. The worry becomes how much more downside is in store before that? Since we don’t know that answer for every name, let’s look at the ones that could pay off down the road.
Bargain Stocks to Buy Before the Bull Market Returns: Salesforce (CRM)
Salesforce (NYSE:CRM) does not get the credit it deserves. The company is well managed and has solid growth, while the stock finally trades at a reasonable valuation. For years, the stock valuation was the biggest critique among the bears.
Now trading at 38 times this year’s earnings, that argument holds a lot less water. At the recent low, shares traded at 32 times this year’s estimates. Some will argue that that’s still too high of a valuation.
However, there are not a lot of quality growth stocks out there still kicking out annual revenue growth of 12% to 20%, as Salesforce is forecast to do from now through fiscal 2026.
Lastly, the stock has seen a brutal peak-to-trough decline of 50.4%. That’s even amid the company’s recent earnings report, where management said it was not feeling the negative effects of inflation or economic slowdown that most other firms are experiencing.
Despite continuous improvements at Disney (NYSE:DIS), the stock continues to languish. That’s as many investors have considered it a streaming stock. While it is a streaming stock, it’s also much more than that.
In just a couple of years, the company has built a streaming powerhouse, while maintaining an enormous library of older content. Between all of its platforms, Disney commands 221 million streaming subscribers. While some streaming companies have failed to gain traction, Disney has not. Not to mention, it also benefits from studio releases and the boom in travel trends. With consumers back to traveling, you can bet that the theme parks are packed right now.
Not to mention, Disney stock trades at a reasonable 22 times earnings with 100% earnings growth forecast for this year. That’s followed by estimates of 40% growth in 2023, leaving shares trading at just under 20 times next year’s estimates.
This for a company that has multiple revenue sources, a strong brand and plenty in the pipeline to drive future growth. That said, a recession would derail Disney stock.
Bargain Stocks to Buy Before the Bull Market Returns: Nike (NKE)
Another stock that is susceptible to a global recession? Nike (NYSE:NKE). However, like Disney, we’re talking about an incredibly strong brand that is considered a best-in-breed for its industry. The company’s products are well known around the world and receive constant demand from consumers.
So long as the world is invested in sports, it’s worth investing in Nike.
The company faces multiple headwinds at the moment, mostly related to inflation, supply chain disruption and currency fluctuations. All of these issues have combined to knock the stock lower, as Nike has suffered a peak-to-trough decline of 44.4%.
While some of the big losses in growth stocks seem to be getting all the attention, we can’t ignore declines like this in high-quality companies. Analysts expect about 8% revenue growth this year and an acceleration to 10% growth in 2024. However, Nike remains a global consumer powerhouse and should continue to do well long term.
Growth in its direct-to-consumer business is outpacing the company’s overall growth, improving its margins and profitability.
Qualcomm (NASDAQ:QCOM) has had some newfound momentum lately, mostly on the news that Apple (NASDAQ:AAPL) has had trouble developing its own 5G modem chip. The assumption was that Apple would develop its own chip and thus, no longer need Qualcomm.
However, Apple’s chip plans have not panned out quite so well. This will likely leave Qualcomm as Apple’s sole supplier for this particular chip. The news has launched Qualcomm stock higher, with shares up about 25% from its 2022 low in June.
Further, shares still trade at less than 12 times earnings and pay out a 2% dividend yield. Some analysts are arguing that the company will now beat expectations for the second half of 2023 and first half of 2024.
The analysts are also arguing that the company will be successful enough in its other businesses to offset the eventual loss of Apple’s business.
Bargain Stocks to Buy Before the Bull Market Returns: Netflix (NFLX)
Netflix (NASDAQ:NFLX) is a very interesting stock, because the company has clear headwinds but the stock has paid a stunning price. Shares have suffered a peak-to-trough loss of 76.8%. However, the stock is now 40% off its lows as the stock rallies amid renewed momentum in the stock market and despite Netflix’s mixed earnings result.
In the most recent quarter, the company lost about 1 million subscribers. While not great, that was better than management’s forecast for 2 million subscribers. Further, earnings — yes, earnings! — came in at $3.20 a share, while revenue of almost $8 billion grew 8.6% year over year. Earnings beat estimates while revenue missed. Margins were questionable too.
Yet the stock price has been in rally mode since, likely as Netflix has fallen so far from the highs in a relatively fast manner. Put it all together and we have an oversold stock trading at roughly 20 times earnings and with a lot of potential for growth in the future.
Taiwan Semiconductor (TSM)
We’re going to end this list with a couple of chip stocks, starting with Taiwan Semiconductor (NYSE:TSM). Shares of this great company have been crushed this year, as have many other tech names. Despite the selloff, business continues to hum along quite well. In mid-July, the company delivered a top- and bottom-line earnings beat and above-consensus forecast for its third-quarter results.
Maybe it’s because it’s not as well-known as some other prominent U.S.-based technology firms. However, TSM stock is not one to be ignored despite its $436 billion market capitalization and 2.2% dividend yield.
The company is forecast to grow sales almost 33% this year and 10% next year. On the earnings front, analysts expect 50% growth this year, although just single-digit growth in 2023. However, at less than 14 times this year’s earnings, this stock is cheap relative to the S&P 500.
And how could we forget: Taiwan Semiconductor has better net margins than all of FAANG, plus Microsoft (NASDAQ:MSFT).
Bargain Stocks to Buy Before the Bull Market Returns: Advanced Micro Devices (AMD)
Last but certainly not least, we have Advanced Micro Devices (NASDAQ:AMD). The semiconductor company recently reported its quarterly results, in which it beat on earnings and revenue expectations. Guidance was a tad light, hence the stock’s small post-earnings dip.
However, AMD just keeps delivering. Following its acquisition of Xilinx, the company is generating free cash flow of almost $1 billion per quarter. Despite the stock receiving a real beatdown, earnings and revenue estimates haven’t been negatively impacted. In fact, they have continued to creep higher since the beginning of the year.
Now we’re looking at a situation where the stock price has been more than cut in half, while the business has not. That drastically lowers the valuation, as AMD stock now suddenly trades at about 20 times earnings (and that’s even after the huge rally from the low).
On the date of publication, Bret Kenwell 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.