Amid increased signs that a powerful bull market could be on the way for the U.S. stock market, there are many good, beaten-down stocks to buy for long-term investors. To assist these investors in their search, I have gathered a short list of stocks to buy before the bull market returns.
A significant amount of economic data is indicating that a new bull market could be closer than many believe. For example, durable-goods orders for July accelerated significantly. Further, inflation expectations among consumers dropped sharply in July, according to the Federal Reserve Bank of New York, while the increase of the core consumer price index dropped slightly in July, compared to its June peak. Further, oil prices have continued to drop in recent weeks.
Of course, reduced inflation will enable the Federal Reserve to raise rates less quickly, causing the economy’s growth to be stronger than if the central bank has to tighten faster to combat inflation.
Moreover, multiple experts are saying recently that we could be on the verge of a bull market, if not this year then the next. One such expert, Forbes contributor John S. Tobey, wrote in his Aug. 31 column that: “Forecasts of 2023 growth, currently waiting in the wings, should soon take the stage. The stock market’s foundation-building since springtime is a good indicator.
Additionally, CNBC’s Jim Cramer recently contended “that there are several things that need to happen for the market to have a bull market within a bear market situation.” I believe that all six items on his list have a greater than 50% chance of occurring.
These four names are my picks for the best stocks to buy before the bull market returns.
Stocks to Buy Before the Bull Market Returns: PayPal Holdings (PYPL)
Like all the companies in the payment space, PayPal (NASDAQ:PYPL) should benefit a great deal from the continued strength of consumer spending.
As evidence of that theory, take a look at what Visa’s (NYSE:V) CFO said on June 7. “In general, spending on credit has been strong. It’s been strong across income groups. It’s been strong on what you might call discretionary spend, right, especially travel, restaurants and entertainment,” executive Vasant Prabhu said.
Moreover, as worries about a recession dissipate and a bull market is launched, PayPal’s price-earnings multiple should climb a great deal, while analysts are likely to meaningfully raise their estimates for the company, fueling a major rally by PYPL stock.
Roku (ROKU)
As InvestorPlace contributor Nicholas Chahine aptly explained in his June 22 column on Roku (NASDAQ:ROKU):
Not much has changed in the business outlook for Roku. The world is still transitioning right into [Roku’s] realm of operations. The streaming trend is only getting stronger, so ROKU stock should continue to have tailwinds for years.
Indeed, streaming’s share of overall TV viewing continues to climb, reaching a record 34.8% share of TV time in July.
A couple of things will change, however, for Roku once the Street gets over its fears of a ruinous recession and gargantuan interest rates. After that occurs, the multiple of Roku stock should jump, and many investors will become less fearful about buying its shares. Meanwhile, there have been rumors that Netflix (NASDAQ:NFLX) is interested in buying Roku. Given Netflix’s significant problems and Roku’s growing, tremendous reach and advertising power, I would not be at all surprised if Netflix does wind up acquiring Roku.
Additionally, easing supply chain pressures should result in more TVs with Roku’s operating system being sold. Meanwhile, Roku’s new deal with Walmart (NYSE:WMT), which enables viewers to buy products on Roku for the first time, looks poised to become very lucrative. Other retailers are likely to sign similar deals with Roku, creating a significant, new revenue stream for the tech company.
Stocks to Buy Before the Bull Market Returns: BlackBerry (BB)
BlackBerry’s (NYSE:BB) Internet of Things (IoT) business, which features its leading QNX operating system for vehicles, continues to regain momentum. Last quarter, the unit’s top line jumped 19% year-over-year to $51 million, and its gross margin came in at a very impressive 84%. Further, the unit’s backlog of royalties climbed 14% YOY to $560 million, while QNX is now installed in 215 million vehicles globally. Finally, the unit had 14 design wins last quarter.
Encouragingly, Blackberry has been unable to keep up with the demand for proof-of-concept trials of its auto app store, which is known as Ivy. I continue to believe that Ivy will be a true game-changer for BlackBerry and BB stock.
And the company, which completed the first quarter of its fiscal 2023 at the end of June, is looking “to be approaching breakeven non-GAAP EPS and cashflow in FY24.” It’s also seeking “to generate positive non-GAAP EPS and cashflow beginning in FY25.”
Amazon (AMZN)
Multiple Wall Street analysts have been upbeat on Amazon (NASDAQ:AMZN) recently. Renowned Wedbush analyst Dan Ives named Amazon as one of four companies that will benefit from resilient spending by companies on the transition to the cloud
Similarly, Morgan Stanley expects Amazon’s cloud business to remain strong during the economic downturn because less than 10% of the unit’s revenue comes from small companies.
Also bullish on AMZN stock was JPMorgan. Amazon remains a “best idea” for the firm, as JPMorgan expects the company’s sales growth to accelerate in the second half of the year. That idea is similar to my own thesis that the company will benefit from a rebound in the e-commerce sector once the pent-up demand for travel cools down somewhat. JPMorgan also expects Amazon to “gain share in underpenetrated categories,” and it kept a $200 price target and an “overweight” rating on the name.
Moreover, going forward, Amazon’s decision to carry out a stock split should continue to result in a higher number of retail investors buying the shares than in the past.
On the date of publication, Larry Ramer owned shares of BB stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.