Investors are facing their first sustained bear market in over 13 years. Inflation is as high as in 40 years and the economic disruption of the pandemic has made it nearly impossible to predict what will happen.
For investors, the bear market can be nerve-wracking, but it also offers the opportunity to buy high-quality stocks for sale. If you have $ 1,500 in reserve, about a week’s salary on average, the three stocks below are likely to drive it up. Splitting the $ 1,500 three ways will give you a good mix of growth and confidence.
1. Costco: A stock that beats the market in any economy
If there is a brick and mortar dealer who deserves to be called bulletproof, it is Costco (COST -1.29%). The retailer is the clear leader in the subscription-based wholesale buying category, and its base of 64.4 million households gives it a level of customer loyalty that the typical retailer doesn’t have. That enrollment income also allows the company to offer rock bottom prices on merchandise.
Costco members love the chain for its low prices, quality products, big savings, and variety of merchandise. Its membership renewal rate is now over 90% globally and over 92% in North America.
The retail giant has performed well not only in the physical channel, but online as well, as it has finally embraced ecommerce after years of shunning it. Costco proved its courage during the pandemic, outperforming during the early stages of the crisis and, more recently, also as a peer. Walmart And Objective they saw profits shrink due to inflation and excess inventory. Adjusted comparable sales in the fiscal year just ended increased 10.6% and its operating income increased 8% to $ 1.8 billion at a time when most of the retail sector is recording a decline in profits.
With the stock down more than 20% from this year’s peak, Costco is expected to reward long-term investors at the current price.
2. Alphabet: a beast of digital advertising
parent of Google Alphabet (GOOG -1.79%) (GOOG -1.84%) it has been a longtime winner on the stock market largely because of one product. Google Search is the most successful advertising product in the history of the world and continues to deliver solid top-line growth and ample operating margins even when much of the rest of the digital advertising industry is struggling with the challenges. Apples ad tracking transparency initiative and the rise of TikTok.
In its most recent quarter, Alphabet grossed $ 69.69 billion, a 13% year-over-year increase, and achieved an operating margin of 28%. This was mainly driven by the growth of Google Search.
Alphabet’s search product has a dominant market share in the world outside of China and continues to grow, as a search engine is an essential utility in the modern world and the demand to be featured on the Google search page is increasing. Its cost-per-click rate also rebounded last year after a hiatus in 2020.
Alphabet stock appears to be well priced at the moment, trading at a price-to-earnings (P / E) ratio of just 19, essentially even with the S&P 500. Considering that the business has long overtaken the S&P 500 and the company is gaining market share in digital advertising, Alphabet seems well positioned to beat the market from here.
3. ServiceNow: a reliable cloud winner
The software-as-a-service (SaaS) industry has been slammed in the past year and it’s easy to see why. The price-to-sale (P / S) ratios for many of these stocks were 30 or more, and many of them were unprofitable. Excessive growth was discounted and rising interest rates and recession fears caused a sharp shift in market sentiment and valuations.
However, not all software stocks are unprofitable as well ServiceNow (NOW -2.38%) offers a great example of a larger, more mature cloud stock that you can count on for solid returns. ServiceNow offers a wide range of software products for IT services and operations, as well as customer support and workflows.
The company’s performance speaks for itself as it has a long track record of steady growth and profitability, as the graph below shows.
NOW YCharts operating revenue data (quarterly growth year on year).
In the most recent quarter, the number of customers who spent at least $ 10 million with ServiceNow exceeded 100, and non-GAAP quarterly revenue increased 29.5% year-over-year to $ 1.82 billion. Adjusted operating income was $ 399 million, or a margin of 23%. And, with its backlog increased 27% in neutral currency terms to $ 12 billion, the company appears to be resisting macroeconomic headwinds.
ServiceNow stock is down 40% from last fall’s peak and the stock is very reasonably priced with a P / E ratio of 44 based on expected earnings for 2023.
With that growth and valuation trajectory, ServiceNow looks set to outperform in the next bull market.
Suzanne Frey, executive of Alphabet, is a member of the board of directors of The Motley Fool. Jeremy Bowman has positions at Target. The Motley Fool has positions and recommends Alphabet (A shares), Alphabet (C shares), Apple, Costco Wholesale, ServiceNow, Inc., Target and Walmart Inc. The Motley Fool recommends the following options: long March 2023 $ 120 calls on Apple and the March 2023 short calls $ 130 on Apple. The Motley Fool has a disclosure policy.