What a difference a year makes.
Last year, the benchmark S&P 500 retraced by no more than 5%. Meanwhile, in 2022, the S&P 500, iconic Dow Jones Industrial Average, and tech-driven Nasdaq Composite have all entered correction territory with double-digit percentage declines. The latter is mired in a bear market with a recent peak decline of roughly 30% since mid-November.
Although bear market declines can be unnerving and tug on investors' emotions, history is quite clear that buying during these big downturns is a smart move. That's because every notable decline throughout history has eventually been put into the rearview mirror by a bull market rally. In other words, bargains abound for patient investors.
The recent stock market plunge has unearthed quite a few innovative and unstoppable stocks that are on sale. What follows are five of those unstoppable stocks to buy now and (ideally) hold forever.
The first unstoppable stock trading at a discount that can be bought right now and never sold is robotic-assisted surgical system developer Intuitive Surgical (ISRG -0.37%). Shares of the company are 39% below their all-time high, which was hit six months ago.
What makes Intuitive Surgical so special is the company's market dominance and operating model. In terms of the former, it's installed 6,920 of its da Vinci surgical systems in hospitals and surgical centers worldwide over the past 20 years. Not only are none of Intuitive's competitors even close to this installation figure, but given the large upfront investment associated with da Vinci systems ($0.5 million to $2.5 million), as well as the training provided to surgeons, clients tend to stay customers for a long time.
As for Intuitive Surgical's operating model, it's geared to grow operating margins at a faster pace than sales over time. During its early years, the company generated the bulk of its revenue from selling da Vinci systems. Unfortunately, these are intricate and costly systems to build, which means margins associated with their sale are only mediocre. But as more systems have been installed, instruments and accessories sold with each procedure, as well as servicing, have grown into the lion's share of Intuitive's revenue stream. The margins associated with these categories are considerably higher.
Da Vinci is still just scratching the surface in thoracic, colorectal, and other general soft tissue surgical indications. This gives Intuitive Surgical an incredibly long double-digit growth runway.
Although bank stocks aren't traditionally thought of as "unstoppable," regional banking giant U.S. Bancorp (USB 1.76%) might change your tune.
The biggest knock against bank stocks is that they're cyclical. This means that when recessions and economic slowdowns rear their heads, banks typically see an increase in loan delinquencies and charge-offs.
But this is a two-way street. Even though recessions are inevitable, they don't last very long. By comparison, economic expansions last disproportionately longer than recessions. Buying bank stocks like U.S. Bancorp allows investors to take advantage of these extended periods of economic expansion and win the long-term numbers game.
On a more company-specific basis, arguably no large-scale bank has done a better job of promoting digital banking than U.S. Bancorp, the parent of the more familiar U.S. Bank. As of the end of February, 81% of its customers were active digitally, with 65% of all loan sales completed online or via mobile app. The latter is up 20 percentage points from the beginning of 2020. Digital transactions are substantially cheaper for banks than in-person or phone-based interactions. Thus, U.S. Bancorp's digital push is allowing the company to lower its costs and improve its operating efficiency by consolidating branches.
At roughly nine times Wall Street's forward-year earnings forecast, U.S. Bancorp is deeply discounted and ripe for the picking.
Though Starbucks is facing no shortage of headwinds (e.g., unionization efforts, soaring coffee prices, and COVID-19 lockdowns closing select stores in China), this is a company that's successfully navigated its way through many recessions and stock market corrections over the years.
Perhaps the most front-and-center advantage Starbucks has is the incredible loyalty of its customers. No amount of inflation or price hikes has scared away the company's faithful base (myself included). This should allow Starbucks to outpace even historically high domestic inflation.
To add to this point, the company's active Rewards members are an army by themselves -- 26.7 million people, as of April 3, 2022. Rewards members are more likely to order ahead and keep their payment info stored on their smartphones. In other words, they're helping Starbucks' stores become more efficient by moving lines along faster.
The company's innovation can't be overlooked, either. Promoting healthier food options and redesigning the drive-thru ordering boards to suggest high-margin food and drink pairings should lead to venti-sized long-term returns for shareholders.
Look up the dictionary definition of "unstoppable," and there's a chance you might find a picture of Berkshire Hathaway (BRK.A 0.41%) (BRK.B 0.11%) CEO Warren Buffett. Since becoming Berkshire's CEO in 1965, Buffett has led his company's Class A shares (BRK.A) to an average annual return of 20.1%! Put another way, investors have doubled their money, on average, every 3.6 years for the past 57 years.
One of the keys to Buffett's ongoing success is his focus on investing in and acquiring cyclical businesses. As noted, periods of economic expansion vastly outpace downturns in length. Rather than trying to guess in vain when a recession might occur, Buffett has loaded Berkshire Hathaway's portfolio with businesses that can thrive from the natural expansion of the U.S. and global economy.
The Oracle of Omaha's love of dividend stocks has played a key role in Berkshire's success as well. Companies that pay a regular dividend are usually profitable, time-tested, and have transparent growth outlooks. In short, they're just the type of businesses we'd expect to increase in value over time.
Based on a number of recent investments, such as oil giant Chevron, which has a $5 base annual payout, Berkshire Hathaway looks to be on pace to collect well in excess of $5 billion in passive income over the next 12 months.
History has shown time and again that riding Buffett's coattails during pullbacks is a moneymaking decision.
Like Starbucks, Meta has a laundry list of near-term challenges, including Apple's iOS privacy changes, heightened metaverse spending (which is weighing on profits), and growing concerns that the U.S. will enter a recession. However, none of these headwinds alters the company's strategy or hinders its double-digit growth potential.
Meta's competitive edge is readily apparent when examining its social media assets and active users. Facebook, Instagram, WhatsApp, and Facebook Messenger, are consistently among the most-downloaded social sites each year. Further, Meta ended March with 3.64 billion monthly active users across its family of apps. This means over half the world's adult population is visiting a Meta-owned asset each month, and it's precisely why advertisers will pay a premium to reach these users.
Something often overlooked with Meta is that the company hasn't even meaningfully monetized all of its core assets. Virtually all of its advertising revenue derives from Facebook and Instagram. If and when CEO Mark Zuckerberg pulls the lever on monetizing Facebook Messenger and WhatsApp, the company's growth and operating cash flow can kick into another gear.
Given Meta's incredible operating cash flow and its aggressive investments in the metaverse, a forward-year price-to-earnings ratio of 14 makes it too enticing for buy-and-hold-forever investors to pass up.