Over long periods (like decades), the stock market has always gone up. It hasn’t done so in a straight line, though, as it has pulled back to a small or great degree every few years. All investors need to expect that there will be occasional stock market corrections and crashes — which can last a few months or a few years. That’s why you should never invest in stocks with short-term money.
It’s worth keeping some cash on hand for such downturns, as many great stocks will be on offer at discounted prices. Here are three stocks you might consider adding to your portfolio when there’s a market pullback.
PayPal (NASDAQ: PYPL) is more than you probably think it is. Yes, it’s the online payment platform spun off by eBay in 2015. But it has grown into a fintech giant — recently sporting a market value near $217 billion — and now encompasses brands such as Venmo, Xoom, Honey, Paidy, Happy Returns, Hyperwallet, and more.
PayPal recently sported 416 active consumer and merchant accounts, employed 27,700 workers, and processed nearly 37,000 payment transactions per minute — for a total volume of about $1.2 trillion over a year.
With a recent price-to-earnings (P/E) ratio near 44 and a price-to-sales ratio near 9, the stock doesn’t look cheap, though it’s more reasonably priced than many popular growth stocks these days. Regardless, a pullback in price will be welcome for investors who see PayPal as having a very promising future.
2. Waste Management
Waste Management (NYSE: WM) has long tempted many investors — while often seeming too richly valued. Meanwhile, though, over the past 10 years, the stock has surged some 572% (an annualized rate of 21%), assuming dividends were reinvested, and 472% without reinvesting dividends (which is 19%, annualized). Clearly, there’s money in garbage.
Waste Management is North America’s premier trash collection and recycling business, offering everything from collection, transfer, and disposal services, to recycling and resource recovery. The company also owns and operates multiple landfill gas-to-energy facilities, making lots of lemonade from lemons. One of the great things about the company is its defensiveness. We’re not likely to stop needing garbage and recycling services anytime soon, so its future seems assured.
With a recent P/E ratio near 40, Waste Management’s stock seems pricey, but a stock market pullback will render its shares more attractive.
Roku (NASDAQ: ROKU) has grown rapidly into a streaming giant, going from being mostly a hardware specialist to now offering lots of content, including original content. As of 2021’s third quarter, the company boasted 56 million active accounts (up 23% year over year), 18 billion hours of streaming (up 21%), and $680 million in quarterly net revenue (up 51%). Management noted:
While the pandemic has had different impacts on different parts of our business, the secular shift to streaming remains intact. Our Q4 outlook is for strong growth with total net revenue of $893 million at the midpoint (up 37% year-over-year), and total gross profit of $385 million at the midpoint (up 26% year-over-year).
In a little over four years, Roku’s stock has surged close to 800%, averaging annual growth of close to 70%. The stock is down 57% from its 52-week high as of this writing, but it still recently sported a price-to-sales ratio of 11 and a P/E ratio of 98, suggesting it’s not exactly inexpensively priced yet. Still, some see the stock as a screaming buy. If you agree, consider buying some shares now — or, better still, waiting for a market pullback.
These are just a few of many great companies you might consider for your long-term portfolio. If any interest you, dig deeper into them to see if what they offer is what you’re looking for.
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Selena Maranjian owns shares of PayPal Holdings. The Motley Fool owns shares of and recommends PayPal Holdings and Roku. The Motley Fool recommends Waste Management and eBay and recommends the following options: long January 2022 $75 calls on PayPal Holdings and short January 2022 $82.50 calls on eBay. The Motley Fool has a disclosure policy.