There are rumblings that the bear market is coming to an end as the stock market continues to push higher. Unfortunately, there are still too many variables to account for before making a call like that. Whether we’re in a bull or bear market though, investors should be looking for blue-chip stocks to buy.
That’s because, whether it’s a good or bad environment for stocks, businesses continue to truck along. However, due to economic issues — whether it’s inflation, currency volatility, supply chain problems, etc. — these businesses can have their share of headaches, too.
Still, the long-term performance of the S&P 500 favors the long side. That means selloffs and bear markets are opportunities for patient buyers. The “when” and at “what price” are more difficult parts of the equation, but as long as we’re buying high-quality companies, those questions aren’t as important as “What are we buying?”
Let’s look at a few blue-chip stocks to buy.
Nvidia (NASDAQ:NVDA) has been destroyed this year, suffering a peak-to-trough decline of 66.7%. After NVDA lost two-thirds of its value, Nvidia bulls have been left shell-shocked. The reality is that the demand for Nvidia’s products has fallen and, as a result, its stock price has cratered.
This is not the first time that Nvidia has run into issues, and it won’t be the last.
The stock’s biggest problem at the moment seems to be its valuation. The “P” of its price-earnings ratio has cratered, but the “E” has taken a big hit, too. So despite the stock’s decline, its valuation hasn’t gotten all that more attractive.
Nvidia stock trades at almost 40 times its earnings, while analysts, on average, forecast its profits to fall almost 25% this year. And the mean estimate calls for its revenue growth to be flat this year.
As with the other names on this list, though, eventually the bad times will end for Nvidia, and good times will ensue for it. Nvidia has rallied about 30% off its lows, but there’s no guarantee that it has bottomed. But we do know that this company generates strong margins and makes the industry’s best GPUs, which power all sorts of end markets and will deliver non-cyclical growth.
Some of those end-markets include: The cloud, artificial intelligence and machine learning, gaming, automotive, autonomous driving, supercomputing, professional graphics, robotics, drones and more.
Alphabet (GOOGL, GOOG)
Things are going to get worse before they get better for Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). However, with the shares on the verge of a 40% decline from the all-time highs they made in Q2, an opportunity in the stock is emerging for long-term investors. In fact, GOOG, like the other names on on this list, is suffering its worst decline in the last 12 years.
Personally, I love Alphabet in the low-$90s even though it’s possible that the shares will sink into the $80s or even lower. Keep in mind that Alphabet stock traded as low as $50.44 in March 2020 at the beginning of the coronavirus pandemic. So the stock is still nearly 100% above its 2020 low.
While that’s an impressive statistic, it suggests that the stock may fall further as ad spending continues to be pressured amid the worsening economy.
Even though analysts, on average, still expect GOOG to deliver 10% revenue growth in 2022 and 8% growth in 2023, they expect its earnings to take a hit. Specifically, analysts’ mean estimates call for GOOG’s EPS to sink 15% this year before rebounding in 2023.
That’s not great, but, given the strength of Alphabet’s business, eventually its valuation will be attractive.
After all, it owns the two most popular websites in the world — Google.com and YouTube.com — and delivers robust financial results. alongside a strong balance sheet and immense cash flow. Finally, Alphabet’s cloud business will continue to grow rapidly over the long term.
When Microsoft (NASDAQ:MSFT) reported its earnings last week, the giant’s top- and bottom-line results beat analysts’ average expectations, but investors weren’t pleased. That’s because its outlook was a bit too cautious, causing the stock to fall 6% in a single session.
That said, Microsoft has many positive attributes that are hard to ignore.
First, the company’s outlook wasn’t that concerning in my view. Second, analysts still, on average, expect the company to deliver strong results going forward. While their mean estimates now call for roughly 7% top-line growth in fiscal 2023, down from about 10% previously, they, on average, now expect roughly 14% increases in each of the next three years.
On the earnings front, mean estimates call for just 5% growth this year, then 17% growth in FY24. If the company meets the mean top-and-bottom-line FY24 estimates, this stock is going to fly higher, as it trades at just 23.5 times MSFT’s current earnings.
Lastly, Microsoft has formed huge barriers to entry and competitive advantages in PC software, enterprise software, social (with LinkedIn), gaming, and the cloud.
On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.