It's been a rough start to the year as major market indexes sell off in the wake of Federal Reserve interest rate hikes. The Nasdaq Composite and S&P 500 indexes have fallen roughly 18% and 11% year to date, respectively, and the selling may not abate anytime soon. But rather than viewing this decline as a negative event, you should, instead, treat it as an opportunity to accumulate stocks of great businesses.
Think of it this way: It's tough to find great businesses trading at attractive valuations, and one of the few chances you'll have to buy them at enticing prices is when markets sell off. Of course, you need to ensure the companies you pick have certain attributes that qualify them as potential investments. Having a strong brand, a resilient business model, and a strategic plan to grow and expand are some examples of such characteristics. And if you're worried about catching a falling knife, you can always pace your purchases into these stocks rather than go all in.
Here are three stocks that look like great bargains amid this current sell-off.
Image source: Getty images.
Visa
There's probably no payments company that is better known than Visa (V 0.65%). Visa had 3.8 billion cards issued at the end of its fiscal year 2021, which ended Sept. 30, 2021, and has seen processed transactions rising steadily since January last year versus the pre-pandemic year of 2019. The company's shares have dipped just 4% year to date and its business looks poised for a rebound as economies reopen and the pandemic slowly recedes.
The payments specialist reported resilient net revenue over the last three years, with fiscal year 2020 seeing a slight dip as consumers temporarily reined in their spending. Revenue rose from $23 billion in fiscal year 2019 to $24.1 billion in fiscal year 2021, and net income of $12.3 billion in fiscal year 2021 also slightly exceeded the pre-pandemic level of $12.1 billion in fiscal 2019. The earnings momentum has carried on into the first quarter of fiscal 2022, with net revenue jumping 24% year over year to $7 billion and net income climbing 27% year over year to $3.9 billion. Visa has also paid higher dividends every single year since its initial public offering (IPO) in 2008, putting it on track to become a Dividend Aristocrat.
The company has also been actively acquiring to boost its capabilities. Last year, Visa acquired Tink, a European open banking platform, for 1.8 billion euros ($1.92 billion). It also snapped up CurrencyCloud, a U.K. platform that assists banks and financial technology companies' foreign exchange transactions relating to cross-border payments, for 700 million pounds ($890 million). These purchases will help to bolster Visa's abilities and allow it to provide a wider breadth of services to its clients.
Domino's Pizza
More people ordered food delivered to their homes during the pandemic, benefiting businesses such as Domino's Pizza (DPZ 2.10%). The leader in global quick-service pizza has more than 18,800 stores globally and is present in more than 90 global markets. The company's shares have declined 33% year to date as investors worry about whether it can sustain earnings growth as economies reopen.
Ordering pizza has not been purely a pandemic trend, though. As hybrid work takes the place of telecommuting, Domino's should still witness healthy sales volumes even as it continues to open stores in other regions to capture more growth. The company's sales in 2021 rose 5.8% year over year to $4.36 billion while net income inched up 3.9% year over year to $510.5 million. Its U.S. stores saw same-store sales growth of 3.5% while its international stores enjoyed 8% growth.
It was a respectable result for a company that believes it still has significant room to grow. Strategic initiatives include leading with technology, with over 29 million active users using its mobile app, and leveraging its global scale to drive healthy returns for investors. Domino's believes the U.S. market can support more than 8,000 stores, up from 6,560 currently, while emerging markets such as Mexico, India, and China can support the addition of more than 10,000 stores in the future. If you believe the company's scale and proven track record can continue to deliver, it may be time to nibble on its shares.
Wingstop
And if you're looking for delicious chicken wings to go with your pizza, look no further than Wingstop (WING 2.81%). The restaurant chain specializes in chicken wings, tenders, and thigh bites in 11 flavors, and operates and franchises more than 1,700 locations worldwide. The company has enjoyed steady, uninterrupted growth through the pandemic, with total revenue rising from $199.7 million in 2019 to $282.5 million in 2021. Net income has more than doubled over the same period from $20.5 million to $42.7 million.
Not only has Wingstop reported steady increases in its top and bottom lines, but it has also increased its quarterly dividend from $0.07 in 2017 to $0.17 in 2022. The company also has a habit of paying out special dividends, and total dividends would amount to $19.80 per share, higher than the company's $19 IPO price.
Wingstop believes it can achieve mid-single-digit domestic same-store sales growth for the next three to five years and expects to add a net 200 stores this year. Its recently opened "Restaurant of the Future" features a new cashless concept, can allow for rapid testing of new recipes and flavors, and can be deployed in locations with heavy foot traffic. Should this concept work well, it will be replicated and may serve as a valuable blueprint for the company's future restaurant designs.
