One Of My Top “Bear Market Shopping List” Stocks Looks Like A Buy…
It isn’t pretty out there in the market. I’m willing to bet that applies to your own portfolio, too. We’re seeing massive drops in stocks across much of the market, and it’s causing a lot of pain.
As I’ve previously warned… nothing is spared during a bear market. But investors should take hope – because this is where opportunities arise, and it’s how new bull markets are born.
Over at my premium service, Capital Wealth Letter, we’re seeing the share prices of a good number of our portfolio holdings falling, too. But we’re not overly concerned.
Why? Because the underlying businesses are doing just fine.
Folks are still trading futures and options contracts. And traders need platforms to provide a marketplace for that to happen. This means our two holdings that operate in this business will continue to take a cut of each of those transactions.
Folks continue to spend time on Facebook, Instagram, and WhatsApp. This means longtime holding Meta Platforms (META) will figure out its advertising hiccup with Apple, and continue to produce outstanding results.
People still need property and casualty insurance. And our two holdings in this business will be happy to provide it for them.
Our top homebuilder position will continue to build homes because people still need a place to live. It just might take longer to sell a house as the market cools down from higher interest rates. (Although it should be noted that by most estimates we are still about 2 million homes short of what we need in this country.)
Kids will still need toys. Consumers will still buy their favorite Nikes. Chocolate isn’t going anywhere. And who doesn’t need a can of WD-40?
That’s why each of these businesses will continue to have a place in our portfolio.
This Could Be A Great Opportunity…
There’s another thing I’m pretty sure people will continue to do no matter what – and that’s swipe their credit cards.
About two weeks ago, I mentioned a stock that almost always near the top of my shopping list when the market turns sour: American Express (NYSE: AXP).
At the time, I said that when AXP trades for less than 10 times EBTIDA, I think that’s a great buy.
Well, I didn’t actually think shares would drop that far… but it has. And now, I’m excited.
As of this writing, shares are trading for about $139. That gives it an enterprise value (value of all its shares, plus debt, less cash) of $120.4 billion. If we divide by its EBITDA value of $12.1 billion, that gives us an EV/EBITDA multiple of just under 10 (9.95 to be exact).
To be sure, the stock could fall further. Remember, I said nothing is safe during a bear market.
Over the last 15 years its lowest EV/EBITDA multiples were 5.16 in March 2009 (the very bottom of the market crash), 6.22 during the pullback in 2016, and 5.75 in 2020 from the Covid-19 crash.
Here’s how the stock performed 12 months later after hitting those low multiples:
- 299% return in 2009.
- 39% in 2016.
- 93% in 2020.
Those are some darn good returns. Of course, we aren’t going to pinpoint the exact bottom. But if you dollar-cost average into shares of AXP if they continue to dip lower, then if history is any guide, you will be sitting on some very nice gains 12 months later.
For the past couple of weeks, I’ve been saying that investors would be wise to make a shopping list if they hadn’t already. While I don’t know exactly when the market will bottom, I wouldn’t blame them for cautiously making some moves now on stocks that almost always prove to be long-term winners.
American Express is exactly the kind of stock I’m talking about.
But there’s a larger lesson here. Over at Capital Wealth Letter, we hold some of the world’s best businesses in our portfolio. And pretty soon, we will be able to add even more wonderful businesses to the portfolio – and for a great price.
In the meantime, if I find a massive problem with one of these businesses that could really curb sales and profits over the next few years (not months), then I will cut it from the portfolio. But until then, I will weather this storm. And when we get a break in the clouds I’ll be ready to put my cash to work.
I strongly encourage you to adopt this mindset. It may not only help you survive this bear market, but you might also end up a lot wealthier on the other side.
Because just like there’s always a bear market around the corner, there’s always a bull market in waiting.
P.S. I’ve discovered a little-known satellite company that just made a game-changing acquisition. Buried in the details of the deal was a stunning revelation that could be worth billions…
Wall Street still hasn’t caught on to the potential, which means early investors could make out with huge gains once the crowd catches on.
To get a full briefing and learn how you can profit, check out my report right here.