Stocks have recovered somewhat from this winter's market sell-off. That doesn't mean it's over, though -- and even if it is, there will be another one in the future. Market declines are the best times to add investments that can supercharge a portfolio for the long term.
The pandemic-induced recession was brief and unique, but the recent market decline is reminiscent of a similar market move near the end of 2018. That also was sparked by fears of rising interest rates. These three stocks were good buys then, and there are reasons to think that now is also a good time to add them to your portfolio.
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Look what happened last time
One way to help maintain a long-term investment horizon is to have a diverse mix that doesn't scare an investor into selling during a market sell-off. During the correction of 2018, the shares of Walt Disney (DIS 0.16%), GPS device maker Garmin (GRMN -0.85%), and spice and flavors company McCormick (MKC 1.68%) held their own with declines of less than 10% vs. much more for the S&P 500 and Nasdaq Composite.
Yet, investors in Garmin and McCormick didn't lose any subsequent upside. Only Disney has failed to match the performance of the S&P 500 and Nasdaq since September 2018. But Disney is a bit of a unique circumstance, and could make up ground from here.
Disney's pivot
The pandemic had significant impacts on nearly every aspect of Disney's business. But its entertainment, cruise, and parks divisions are making a comeback. Investors, however, have largely focused on the progress of an accelerated rollout of its streaming business. A recent slowdown in the subscriber growth rate for Disney+ has hit the stock price, even though the subscription service has become a serious challenge to competitor services.
Disney is confident it will hit its previous target for Disney+ subscribers.
But in its first-quarter fiscal 2022 conference call with investors, Disney CEO Bob Chapek reiterated that the company still feels it is on track to reach 230 million to 260 million total paid Disney+ subscribers globally by the end of fiscal 2024.
All solid businesses
If Disney management is right, the company's streaming offerings will be just another catalyst for the company's rebound and growth. The theme park business continues to bounce back, and Disney is integrating its sports and entertainment segments with its Disney+, Hulu, and ESPN+ streaming services. That should be a winning, long-term formula for the company and its shareholders.
Garmin and McCormick also look to have bright futures. Like Disney, Garmin has also pivoted its business in recent years. Its automotive GPS devices used to be a much larger part of sales before smartphones took over much of that customer base. The auto segment has gone from 37% of its total revenue in 2015 to 29% of its sales in 2016, and just 12% in 2021. Yet, overall revenue has grown 11% annually for the last five years. Its products remain popular, and now the automotive business is back in growth mode, too.
McCormick similarly grew sales 13% in its fiscal 2021 compared to 2020. It expects that growth to slow to mid-single digits over the next year as some of the pandemic tailwinds ease. But cooking at home is continuing to be a trend above levels seen prior to the pandemic. And the company has added popular brands, including Frank's Hot Sauce, French's Mustard, and Cholula over the past five years that should remain strong contributors.
With these three businesses all looking to be in good shape moving forward, there's every reason to believe their shares will mirror the types of recoveries seen in previous market downturns. That makes them timely buys in the recent market correction.
