If you’re a “buy on the dip” kind of investor, the current pullback is a doozie of an opportunity. Although the S&P 500 (SNPINDEX: ^GSPC) finished last week on a high note, the index still sits 13% below March’s high and remains down 16% for the year. And for some of these stocks, the past few months have been much, much worse.
It’s that particular group we’re interested in right now…the ones that have led the broad market sell-off. While investor sentiment is understandable, some sell-offs have been overdone. The market should soon correct its mistake by upping prices for these names. Friday’s bounce may even mark their pivots.
Here’s a closer look at your top-three prospects from this group right now.
Most investors likely know Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) as the name behind search engine behemoth Google and online video repository YouTube. What most investors don’t fully appreciate, though, is the reach of both platforms.
See, Google handles 92% of the world’s web searches, according to data from GlobalStats’ Statcounter, while YouTube draws over two billion unique users every month, serving up more than a billion hours’ worth of video content every day.
Technically speaking, that makes it bigger than streaming giant Netflix, even if the monetization model is a bit different. Alphabet also owns the popular Android mobile operating system, and its cloud computing services arm is getting pretty big, too. Google Cloud’s $5.8 billion worth of revenue last quarter, in fact, was up 45% year over year, accounting for more than 8% of Alphabet’s top line.
It’s a nice mix of complementary, resilient businesses, although the market hasn’t seen it that way of late. Shares are down 18% just since late March and are 22% lower than November’s highs. Investors seem to think the combination of Russia’s invasion of Ukraine, rampant inflation, and the growing specter of a recession is more than the company can handle.
What the market may not realize, however, is that these sorts of headwinds don’t really negate the need for smartphones, web searches, apps, or cloud computing platforms. Although it was mostly a search engine at the time, Alphabet sailed through the 2007/2008 recession prompted by the subprime mortgage meltdown as if it wasn’t even happening, growing revenue and income every year between 2006 and 2009. The arrival of COVID-19 was only a blip for the company’s revenue growth as well.
Simply put, Alphabet’s businesses are built like tanks.
Warner Bros. Discovery
Generally speaking, investors haven’t really known what to do with Warner Bros. Discovery (NASDAQ: WBD), which was simply “Discovery” before the company officially acquired WarnerMedia — including HBO Max — from AT&T back on April 8. But they’ve not given it any benefit of the doubt. Warner Bros. Discovery shares are down more than 40% from their January high, bumping into new 52-week lows just last week.
The strong selling, however, dismisses the powerhouse that this company is going to be with both HBO Max and Discovery+ in its streaming portfolio.
Think about it. The Discovery brand is one of the TV market’s best known for lifestyle content, with channels like Animal Planet and Food Network and shows like Chopped, 90 Day Fiance, and Lone Star Law in its portfolio.
Meanwhile, Warner Brothers not only is a film licensee for DC characters like Batman and Superman and the name behind The Matrix franchise but also owns television shows like Friends and The Bachelor. Although how the eventual combination of the two platforms will look and be priced isn’t completely clear, it’s not a stretch to suggest it will be one of the streaming market’s most complete, robust, one-stop-shop offerings.
Other streaming services should be afraid, but more than that, Warner Bros. Discovery shareholders should be excited about the company’s opportunity to leverage several powerful brand names.
Finally, add Ford Motor Company (NYSE: F) to your list of S&P 500 stocks primed for a bounce.
Yes, its investment in electric vehicle outfit Rivian Automotive has become a full-blown debacle. Rivian shares are now down 65% from their initial public offering (IPO) price of $78 and 85% below their post-IPO peak of $179.47.
The big pullback translated into a loss of $3.1 billion for Ford last quarter since the value of investments in publicly traded stocks on a company’s books must be adjusted to reflect changes in that stock’s price. This write-down is a big part of the reason Ford shares have been nearly halved just since January. Helping drive the stock lower, of course, is the bearish marketwide undertow.
If you can look past all the hysterics and noise, however, you’ll see this is not yesteryear’s struggling Ford. The economic automobile maker is reinventing itself as a legitimate electric vehicle contender. For example, its battery-powered Mustang Mach-E is Consumer Reports’ top EV pick for 2022, displacing the Tesla Model 3, and its Lightning pickup truck is receiving rave reviews now that it’s starting to ship in numbers and can be test-driven. Both vehicles are well sold out.
It’s only a taste of what’s to come, though. Ford intends for half of its production to be all-electric vehicles by 2030, and to support this push, Ford Motor already quietly operates North America’s biggest EV charging network.
If you believe the electric vehicle revolution is for real, Ford stock is actually one of the top ways to plug into it right now.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. James Brumley has positions in AT&T, Alphabet (A shares), and Warner Bros. Discovery, Inc. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Netflix, and Tesla. The Motley Fool recommends Warner Bros. Discovery, Inc. The Motley Fool has a disclosure policy.