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Stock market dive: 3 discounted stocks to buy now and never sell

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There’s no doubt that it’s been a tough year for an investor. Since hitting historic highs in the first week of January, the iconic Dow Jones Industrial Average and broad-based S&P500 were down 13.5% and 18%, respectively, as of May 11.

For dependent growth stocks Nasdaq Compound, it was an even more painful fall. After its closing high of six months ago, the index plunged 29%.

While steep declines in the stock market can be scary and upset investors’ emotions, it’s important to recognize that corrections (and even bear markets) are a normal and inevitable part of the investment cycle. When looked at from a broader perspective, every notable drop in the history of major indexes has proven to be a buying opportunity for patient investors.

A person using a pen to point down a correction in a stock chart displayed on a laptop computer.

Image source: Getty Images.

More importantly, as the market dips, trading in high-quality companies becomes more pronounced. What follows are three discounted stocks that long-term investors can buy with confidence now and probably never have to sell.

Berkshire Hathaway

If there is one stock that has definitely demonstrated its ability to stand the test of time, its conglomerate Berkshire Hathaway (BRK.A 0.73%)(BRK.B 0.75%). Berkshire is the company run by billionaire Warren Buffett.

Since taking the reins in 1965, Buffett has overseen the creation of more than $680 billion in shareholder value (himself included) and generated an average annual return of 20.1%. In total, we are talking about an increase of more than 3,600,000% for the company’s class A shares (BRK.A). Even though Berkshire Hathaway is likely to see years of declines, its track record is long enough to show that it regularly tops the S&P 500 over long periods.

Warren Buffett’s love of cyclical companies is one of the reasons Berkshire Hathaway is such a smart investment. A “cyclical” business does well when the US or global economy is expanding, and may struggle in a recession or slowdown.

The Oracle of Omaha is well aware that recessions are an inevitable part of the business cycle. Rather than trying to time when they will happen, he has filled Berkshire Hathaway’s portfolio with companies that thrive during boom times. The fact is, booms last considerably longer than recessions, which puts Buffett’s portfolio in an ideal position to benefit from the natural expansion of US and global gross domestic product. It’s a boring strategy that pays off over time.

The other secret to Berkshire Hathaway’s success is the mountain of passive income it receives. Following major investments in Chevronand Verizonover the past two years, Buffett’s company appears to be on track to generate north of $6 billion in annual dividend income. Because companies that pay a dividend are often profitable and proven, they are better equipped to weather economic downturns.

Historically, any double-digit percentage decline in Berkshire Hathaway shares has been a green light for investors to shop around.

A smiling person holding a credit card with his right hand.

Image source: Getty Images.

MasterCard

A second discounted growth stock that investors can buy right now and never worry about selling is the payment processor MasterCard (MY 3.60%).

Similar to Berkshire Hathaway, Mastercard is not immune to economic downturns and recessions. If consumers and businesses cut back on spending, Mastercard’s sales and profits are likely to plummet. The growing prospect of a recession in the United States is the likely reason why the company’s shares have fallen nearly 20% from their all-time high.

However, there are plenty of reasons to be excited about Mastercard’s long-term opportunity. First of all, it is a major player in the first consumer market: the United States. According to Securities and Exchange Commission filings of the four major credit card networks, Mastercard was responsible for nearly 23% of the credit card network’s purchase volume in the United States in 2020. This is a position lucrative to occupy given that economic expansions far exceed recessions in length.

Investors can also be enthused and comforted by the fact that Mastercard acts strictly as a payment processor. Although he would probably have no trouble generating interest income and fees as a lender, becoming a lender means being exposed to bad debts during recessions. Since the company does not lend, no capital needs to be set aside during recessions. This explains why Mastercard is able to rebound faster than most financial stocks after a downturn in the US or global economy.

Speaking of the global economy, the majority of transactions are still done in cash. Mastercard has a long track to organically or acquisitively expand its payments infrastructure in emerging markets. Being able to rely on predictable cash flows from developed countries, as well as accelerated growth in emerging markets, should allow Mastercard to maintain a long-term annual growth rate of around 10%.

Mickey and Minnie Mouse welcome guests to Disneyland.

Image source: Disneyland.

waltz disney

The third discount stock just waiting to be bought and never sold is the theme park operator and entertainment kingpin waltz disney (SAY 2.90%). Shares of the company are nearly 44% below their 52-week high.

Arguably the biggest issue for Disney over the past two years has been the unpredictability of the COVID-19 pandemic. Pardon the theme park pun, but this sounded like a merry-go-round of park closures and mitigation measures needed to combat COVID-19. In the company’s latest quarterly report, it cited the closures in Hong Kong and Shanghai as negatively impacting Disney parks revenue.

While closed theme parks are less than ideal, the growing consensus among researchers seems to be that we’re past the worst of what COVID-19 and its variants have to offer. While China’s response to COVID-19 cases should be more in line with the rest of the world, the key point is that theme park disruptions are not a long-term concern.

In addition to eventually overcoming the headwinds of COVID-19, Walt Disney continues to impress on the streaming front. At the end of the second fiscal quarter (April 2, 2022), Disney+ had 137.7 million subscribers, an increase of 33% over the prior year period. Average monthly revenue per global subscriber increased 9% from the second quarter of 2021, with the company highlighting strength in existing markets and increases in retail prices.

Another reason House of Mouse makes such a simple investment is its pricing power. Disney has a huge library of original content that helps it connect with people of all ages. Not to mention that its theme parks can rejuvenate anyone. Walt Disney has never had a problem passing on price increases to consumers and is therefore able to stay well ahead of the prevailing rate of inflation.

While Disney faces its fair share of short-term headwinds, its long-term future remains bright.

Sources

1/ https://Google.com/

2/ https://www.fool.com/investing/2022/05/15/stock-market-plunge-3-stocks-to-buy-now-never-sell/

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