After seeing the market carnage since the start of the year, it would be easy to throw in the towel on stocks. Already down more than 20% from its highs, each of the S&P 500‘s recent rebound efforts so far seems to have faded pretty fast. We could see more downside before all is said and done, particularly given that summer and early fall are tepid times for stocks anyway.
As veteran investors can attest, though, the time to buy is on the dips. And yet trying to perfectly time any entries often hurts more than it helps. As 17th-century scholar Robert Burton put it, we shouldn’t be “penny wise and pound foolish” by holding out for the exact bottom we may not actually recognize as the bottom at the time.
With that as the backdrop, if you’re looking to score some major long-term-gain stocks, here are five you can’t go wrong with while they’re down.
It may be a bit obvious and overused as a suggested investment, but Alphabet (GOOG 1.83%) (GOOGL 1.68%) has earned the “can’t go wrong” accolade for all the right reasons. Year-over-year revenue has only slumped in two quarters during the past 10 years, and one of those was linked to COVID-19’s arrival in the United States back in 2020.
The headwind was overcome by the next quarter.
You know Alphabet is the parent of search engine behemoth Google. You may or may not know that it’s also the owner of the online video platform YouTube, and you likely don’t realize it’s also the name behind the mobile operating system Android. Android and Google are (by far) the dominant names in their respective arenas, according to data from GlobalStats. While YouTube is in a category mostly by itself, it’s still a clear powerhouse when it comes to keeping people entertained. Market research outfit eMarketer estimates more than 130 million consumers in the United States alone will watch YouTube videos on a true television set this year, pitting it against more traditional streaming names like Netflix as well as traditional cable TV services.
The point is, wherever Alphabet goes, it tends to dominate.
You may not be familiar with a company called ServiceNow (SNOW 3.01%), but there’s a good chance you’re a customer of a company that relies on the software it provides. As of its most recent tally, about 7,400 organizations are ServiceNow clients, collectively contributing more than $1.7 billion worth of revenue during the first quarter of this year alone. That’s 29% better than ServiceNow’s top line from the same quarter a year earlier, underscoring the growth potential of the no-code workflow software market.
In the simplest terms, workflow software provides a way for workers to build their own computer programs even if they don’t actually have any coding experience or training. By empowering employees with these tools, efficiency goes up, and costs go down. ServiceNow offers custom-built workflow solutions for clients ranging from human resources departments to risk-management teams to a company’s customers themselves.
The industry is still in its infancy too. Fortune Business Insights estimates the workflow software market is on pace to grow by an average of more than 30% per year between 2020 and 2028, boding well for ServiceNow and its shareholders.
Merck (MRK 1.15%) was never one of the top contenders in the race to create a COVID-19 vaccine, nor in the effort to find an effective treatment for those who had been infected by the virus. That’s the biggest reason this stock didn’t perform as well as many other drugmakers’ stocks did in 2020 and 2021.
In retrospect, though, perhaps Merck’s unwillingness to pull out all the stops to address COVID-19 was a brilliant decision. Key coronavirus players like Moderna and Pfizer are now watching their stocks struggle because there’s no proverbial second act to ending a pandemic. Or, perhaps just as problematic, the COVID-19 virus is evolving faster than the drugs and vaccines specifically designed for it are. The newest sub-variant of the omicron strain of the virus is surprisingly resistant to most of the approved vaccines aimed at the disease.
Rather than being bogged down by a short-lived, highly competitive coronavirus opportunity, Merck has continued to develop its flagship drug, cancer-fighting Keytruda. While most investors were eyeing the pandemic and what’s happening in Washington, D.C., for the past couple of years, Keytruda was approved for several more uses that helped drive its sales higher by more than 50% during the first quarter of the year.
Sometimes staying focused is the smart-money move.
It’s easy to dismiss Comcast (CMCSA 0.23%) as an investment prospect. It’s parent to cable television provider Xfinity, after all, and the cable television business is slowly dying thanks to the continued cord-cutting movement.
What the assumption overlooks, however, is that cable television is only a small part of what Comcast does, and everything else Comcast does is capable of offsetting cable’s headwind.
Some simple numbers flesh out the idea. For the company’s first quarter of the year, less than 18% of its top line came from cable TV. Nearly a fifth of its revenue was produced by broadband services that are causing so many cable customers to cancel their cable subscriptions. Around a third of its top line came from its NBCUniversal arm, which monetizes TV and movie theaters in a way that sidesteps the headwind upending the cable television business itself. The NBCUniversal unit even operates its own streaming platform in Peacock, and also owns a few theme parks. The UK’s Sky TV brand rounds out Comcast’s revenue mix.
It’s never going to be a high-growth outfit. The stock’s 36% sell-off since September, however, doesn’t make sense given how many reliable profit centers this company is actually working. Newcomers will be stepping in while the well-supported dividend is a healthy 2.8% of the stock’s price.
5. Berkshire Hathaway
In some ways, it’s a chicken’s way out of actually selecting stocks, punting those stock-picking duties to Warren Buffett and his team. It’s also a move that sometimes leaves Berkshire shareholders second-guessing their decisions. Buffett and Berkshire were both heavily criticized in 2020 and 2021 when his value-oriented fund consistently lagged the performance of the S&P 500; not everyone was a fan of the fact that Berkshire would rather sit on idle cash that at least takes a swing on new positions. Some of those naysayers even suggested that Buffett’s cautious, patient approach — and the idea of value investing itself — was dead and that growth was the only metric worth considering going forward.
Simply put, though, the critics are wrong. Give Berkshire and Buffett’s acolytes enough time, and you’ll be glad you did. It takes tough times to remind the market that value stocks have their place in your portfolio. We may be on the cusp of such tough times.
Those criticisms also overlook the fact that while Berkshire owns a lot of familiar stocks like Apple and Occidental Petroleum, the company also owns a huge number of privately held, cash-generating corporations like Fruit of the Loom, Lubrizol, Clayton Homes, and Duracell, just to name a few. Sometimes it’s smart to own a piece of companies that aren’t so beholden to stock-price concerns.