Whether you’re an experienced investor with decades of stock-picking expertise or a brand-new entrant to the market, 2022 has been a tough year. The S&P500 the index is down 16% since the start of the year. It’s one of the steepest market declines in decades, surpassed only by truly historic events: the Black Monday crash of 1987, the bursting of the dot-com bubble in 2001 and 2002, and the collapse of mortgage lending. at risk of 2008.
Large-scale market downturns like this can bring big stocks down just as far and fast as lower-quality names. The difference is that robust companies can weather these storms and generate above-market earnings. But, at the same time, the same correction will be the final straw for lesser struggling companies.
The two tech titans below have what they need to survive and thrive for decades to come. At the same time, they have fallen between 36% and 51% below the record prices they reached last November. With stock prices hovering just below $100 per share, these proven winners may never be so affordable again.
If you don’t already have these household names, now would be a great time to start. If you do, it’s never too late to get more exposure to market-beating stocks at attractive prices.
Amazon: $93 per share, down 45% in 2022
You know all about Amazon (AMZN -0.77%)sure.
The e-commerce giant has probably drowned your neighborhood in parcels since the coronavirus crisis got everyone used to ordering everyday products online. These Amazon-branded delivery trucks are around every corner, all the time. And when you log on for any reason, the Amazon Web Services (AWS) cloud computing platform powers many of the sites, services, apps, and businesses you’ll find in cyberspace.
Wall Street acts as if Amazon’s golden age is over. Investors have been spooked by restrained consumer spending due to runaway inflation, driving stock prices lower and lower. The stock took a 24% discount in April, started to rally in early summer, then plunged again. Amazon’s stock price is now 35% below the recent peak in mid-August.
But the inflation-fueled slowdown isn’t the end of e-commerce as we know it. Cloud computing is also here to stay for the long haul. Either way, some traders hit a temporary speed bump and jump to the conclusion that the wheels are falling off.
There is always light at the end of the macroeconomic tunnel. The sun follows every storm and rises even at the end of the darkest night. Likewise, rising inflation will eventually slow to a reasonable level and revive the global economy.
Meanwhile, Amazon’s market-leading stature in cloud computing and online shopping isn’t going away. The company still has the growth-focused mindset of a hungry start-up, coupled with some of the deepest pockets in the market. Amazon can take the hits and come back strong.
I expect Amazon’s stock to fully recover when the economic crisis subsides, and then it will begin to expand its global footprint, product and service lineup, and stock market value again.
Alphabet: $98 per share, down 32.7% in 2022
ParentGoogle Alphabet (GOOG -1.24%) (GOOGL -1.02%) is a chameleon. The activity you see today, with a heavy focus on online ad sales and the Android mobile ecosystem, won’t be relevant forever. But when the next drastic change comes, Alphabet is designed to turn a penny and find another way to make big bucks.
In fact, this flexibility is why we’re talking about Alphabet here, not Google Incorporated. The company was reorganized under the Alphabet umbrella to make it easier to access new markets where the Google name carries no automatic benefit.
So far, the most promising alternative revenue stream comes from the Google Cloud Platform. This operation still bears the Google name but does not depend on advertising-based revenue streams. So while Google’s ad business saw year-over-year revenue growth of just 2.6% amid slowing inflation-fueled digital ad spending in the third quarter recently reported, Google Cloud reported strong demand and a 38% increase in sales.
Other ideas will eventually follow; they just take a while to mature. Alphabet explores potentially game-changing ideas in areas as diverse as medical science, self-driving cars, high-speed Internet access services and venture capital. Many of these experiments will never make meaningful contributions to Alphabet’s bottom line, but the company pursues too many powerful ideas to be empty.
Developing a handful of real winners from many ideas should be enough. There is nothing wrong with losing a few bets, if not most of them. Baseball legends like Ty Cobb and Babe Ruth have retired in nearly two-thirds of their at-bats.
This flexible-by-design business model makes Alphabet a purchase for all seasons. But Wall Street ignored this broader ambition and preferred to focus on the short-term effects of cutting advertising spending. Alphabet’s two share classes are down about 33% in 2022, and they trade at just 20 times earnings. This is the lowest P/E ratio Alphabet’s stock has seen in a decade.
Alphabet has built these stocks for longevity, and it’s a powerful tool for building wealth. You should take full advantage of short-sighted discounts like this.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Anders Bylund has positions in Alphabet (A shares) and Amazon. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares) and Amazon. The Motley Fool has a disclosure policy.
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