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Eternal Optimist Pod Group

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Down Stocks To Buy

When seeking out the best stocks to buy now, investors will need to be brave and patient in regard to timing, as well as agile as the stock market eventually transitions from bear market to bull market. Go ahead and add resolute to the character traits you'll need this year, because many market strategists say you can't get from one market to the other without going through a recession first.

down stocks to buy

While gross domestic product (GDP) growth slowed to 2.7% in 2022, Kiplinger's current economic forecast calls for GDP to slow further to 0.8% in 2023 if there is a mild recession. But if the economy can avoid a recession this year, then growth will likely expand at about a 1.3% rate. Look for inflation to fall to a 3.5%-4.0% rate by the end of 2023, down from the 6.5% seen at the end of 2022 and 6.4% in January. By the time the Federal Reserve finally stops hiking interest rates, perhaps in the third quarter of 2023, the federal funds rate will likely be in the 5.25%-5.50% range, up from 0.25% in March 2022.

Given the uncertain, sometimes roiling backdrop for stocks, where should investors look when seeking out the best stocks to buy now? A popular piece of advice among Wall Street strategists now is to resist the bargain-basement appeal of the most beaten-up stocks and focus instead on high-quality shares. "Investors should avoid volatile names and be cautious on both deep-value and unprofitable growth companies," says Koesterich. "Instead, emphasize quality with a focus on earnings consistency and good profitability."

Now may be a good time to tilt toward value-oriented companies and small-cap stocks, both longtime underperformers that are showing signs of new life. Over the past five years, for example, the S&P 500 Value Index (opens in new tab) has returned 6.2% annualized, compared with 9.1% for the S&P 500 Growth Index (opens in new tab). Through early 2023, value has outperformed growth, with a 4.1% return compared to growth's 3.8% gain. "We would stick with value. These cycles last a while," says Ryan Detrick, chief market strategist at money management firm Carson Group (opens in new tab). Sectors typically grouped in the value style include energy, financials, industrials and materials.

So, with all of this in mind, here are 12 of the best stocks to buy now. The names featured here vary by size and industry and are not meant to compose a diversified portfolio. But all, for one reason or another, are well positioned to benefit from a transition to a bull market from a bear market in 2023.

Don't ignore the tenets of diversification and shun tech or the growthier side of the market completely when adjusting your portfolio to include the best stocks to buy now. Instead, take a barbell approach, says Tony DeSpirito, a managing director and portfolio manager at BlackRock (opens in new tab). This will allow you to scoop up value-focused shares at historically attractive relative price-to-earnings ratios (P/Es) and high-growth stocks at valuations that have come down from the stratosphere and are now at normal, if not yet underpriced, levels.

Take Advanced Micro Devices (AMD (opens in new tab), $76.61), a leading semiconductor manufacturer. Analysts have mixed ratings on one of Wall Street's best semiconductor stocks in part because an economic slowdown and negative investor sentiment are near-term obstacles.

Amazon fits the bill. The stock is down 36% over the past 12 months. Is this growth-stock darling now a value stock? Shares are cheap relative to historic levels. At $96, Amazon stock trades at 56 times forward earnings; its five-year historical forward P/E is 71.

Matador Resources (MTDR (opens in new tab), $52.38) is an oil and gas exploration and production company that has risen alongside its fellow energy stocks over the last 12 months. Specifically, MTDR stock is up more than 20% year-over-year.

Even with its impressive growth on the charts, MTDR is one of best values on this list of the best stocks to buy now. Shares are currently trading at just 5.1 times forward earnings, well below Matador's five-year average of 11.2.

Investors seeking out the best stocks to buy now might consider holding for longer than one year: Keith says she sees "significant market-share opportunity" for Workday, and over the next three years, the stock's potential reward outweighs the risk.

Why is Merck (MRK (opens in new tab), $109.16) on this list of the best stocks to buy now? The pharmaceutical giant is known for its high returns over the past decade. Analysts are upbeat toward MRK, too, as evidenced by a consensus rating of Buy. Of the 27 analysts that follow Merck tracked by S&P Global Market Intelligence, 13 say it's a Strong Buy, seven have it a Buy, six call it a Hold and one rates it at Sell.

And for investors seeking out the best defensive stocks, Huynh says MRK's growth is "low risk," and that cancer drug Keytruda and HPV vaccine Gardasil are "well established and less affected in the near term by healthcare reforms under the Inflation Reduction Act (IRA) than peers."

Morgan Stanley (opens in new tab) analyst Matthew Harrison upgraded the stock recently to Overweight, the equivalent of Buy, citing the strength of the company's pipeline and the stock's undervalued price. Amgen shares have gained about 7% over the past 12 months but trade at 13 times 2023 expected earnings, a fraction of the P/E of 70 that's typical for biotech firms. With all this in mind, it's easy to see why AMGN is on this list of the best stocks to buy now.

The US Federal Reserve has increased interest rates on seven occasions in 2022. At the latest meeting of the policymakers on December 14, the benchmark interest rate was increased by 50 bps to 4.25% - 4.5%. The Federal Reserve also revealed that it intends to increase the benchmark interest rate by 0.75% next year to surpass the level of 5%. This means that any possibility of an interest rate cut should not be expected till 2024. In such circumstances, numerous companies with solid growth prospects, such as Tesla, Inc. (NASDAQ:TSLA), Lyft, Inc. (NASDAQ:LYFT), and Warner Bros. Discovery, Inc. (NASDAQ:WBD), have seen their stock prices dip. The macroeconomic challenges provide investors an attractive opportunity to go long on some of the best beaten-down stocks now.

Experts believe that Coinbase Global, Inc. (NASDAQ:COIN) can survive and benefit from the downturn in the cryptocurrency universe in the long term. The industry has been recently shocked by the surprising downfall of FTX and its founder Sam Bankman-Fried. This is expected to dent the confidence of investors in cryptocurrencies. However, once the downturn overturns, Coinbase Global, Inc. (NASDAQ:COIN) is expected to emerge as one of the biggest beneficiaries due to its strong cash position and its focus on streamlining its operations.

Rivian Automotive, Inc. (NASDAQ:RIVN) is an Irvine, California-based manufacturer of electric vehicles (EVs). The company founded in 2009 is one of our two picks from the EV sector that have been heavily beaten down and should be bought at the current levels.

In addition to Rivian Automotive, Inc. (NASDAQ:RIVN), companies like Tesla, Inc. (NASDAQ:TSLA), Lyft, Inc. (NASDAQ:LYFT), and Warner Bros. Discovery, Inc. (NASDAQ:WBD) are also some of the best beaten down stocks to buy now.

In 2022, the S&P 500 lost 20%, posting its worst year since 2008. It was a tough year for investors and growth stocks specifically, as rising interest rates and geopolitical uncertainty put pressure on companies with lofty valuations.

Sell-offs in the market can be painful, but for investors, times like this present an opportunity to buy quality companies at cheap valuations. The following beaten-down growth stocks trade near their lowest valuations this decade and represent an intriguing buying opportunity today for investors with a long time horizon.

Shopify (SHOP 5.39%) provides small businesses the tools to handle everything from payments to inventory management. Shopify investors have endured a roller-coaster ride regarding the stock price. It was a huge winner during the pandemic when lockdowns and travel restrictions pushed consumers to spend more money online than ever before.

Another pandemic-era winner that was beaten down in the last year is PayPal Holdings (NASDAQ: PYPL). Over two years ending in 2021, PayPal added 122 million new accounts, grew revenue by 43%, and surpassed $1 trillion in total payment volume for the first time. Management set aggressive goals for the fintech back in February 2021, aiming to double its active accounts and free cash flow by 2025. Those goals were a little overenthusiastic.

The reopening of the economy and lifting of travel restrictions resulted in slower growth for PayPal, leading to multiple revisions to its guidance last year. It also shifted its focus from growing new accounts to increasing the transactions per active account (TPA). These changes resulted in a sharp sell-off, with the stock down 75% since it peaked two years ago. The fintech now trades at its cheapest valuation since it spun off eBay in 2015.

Growth stocks have taken a beating over the past year. Investors have reset their expectations on how fast companies can grow in the future amid higher inflation and interest rates, which has weighed on valuations.

Two beaten-down growth stocks that look particularly attractive right now are Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and CrowdStrike (NASDAQ: CRWD). While they're facing some near-term headwinds, their long-term growth prospects remain bright. As a result, investors with a couple of thousand dollars to spare should consider grabbing some shares while they're down.

Meanwhile, the discount on Alphabet's stock price will enable the company to buy back even more shares. It generated about $60 billion of free cash flow last year and used nearly all of it ($59.3 billion) on share repurchases. The company could generate even more free cash flow to buy back stock this year as its cost-saving initiatives increase earnings. When adding in the long-term upside potential from AI, those near-term catalysts make this beaten-down tech stock look very attractive right now. 041b061a72


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