This year has not been kind to stocks -- the S&P 500 is down 13% so far and the Dow Jones Industrial Average is off almost 9%. Tech stocks are doing even worse because they got routed beginning last November, causing the Nasdaq 100 to lose over 23% of its value.
While that puts the tech-heavy index into bear market territory already, with the Federal Reserve looking to tame inflation by aggressively hiking interest rates, the more widely followed indexes could tumble even lower. In fact, investors should probably count on it happening. Market corrections and crashes are part of the investing cycle.
That doesn't mean you should pull your money out of the market and stick it under a mattress. Bear markets are actually a great time to go shopping, as all the stocks you wanted to buy but thought too expensive are suddenly affordable. At the same time, don't try to wait for the bottom; you'll never find it.
Image source: Getty Images.
The smartest strategy for investors is to be regularly adding money to their portfolios all the time and buying good businesses to own long term. Although you might not get the precise lowest price for the stock, hardly anyone ever does, and for those who do, it's more likely by chance than planning.
With that in mind, if you have $400 to put to work in the stock market today, here are three stocks you may want to buy and hold on to for the long haul.
Image source: Destination XL.
1. Destination XL Group
Unlike much of the rest of the retail industry, men's big-and-tall clothing chain Destination XL Group (DXLG -1.83%) is seeing strong sales growth despite consumer concerns about a recession. In its recent first-quarter report, sales were up 15% from last year and 13% above 2019. Profits were also 54% above the year-ago period and a complete U-turn from the loss recorded three years ago.
It was during the initial outbreak of COVID-19 that Destination XL had to delist from the Nasdaq exchange because its stock had plunged after its stores were forced to close. It subsequently relisted, and business has been booming, with the retailer reporting five consecutive quarters of rising sales and profits.
The stock is still down 22% year to date, but with shares trading at 5 times trailing earnings, 7 times next year's estimates, and just a fraction of its sales, Destination XL is a bargain at these levels. With Wall Street forecasting that earnings will grow 15% annually for the next five years, it makes the apparel retailer a good, long-term buy.
Image source: Dollar Tree.
2. Dollar Tree
Deep discount chain Dollar Tree (DLTR -0.25%) is a retailer that's primed to benefit from a recession because its business is designed to help consumers stretch their wallets. It also just reported earnings that showed customers responding to its value proposition.
First-quarter sales jumped 6% from last year while profits rocketed 47% higher and handily beat analyst expectations. It wasn't that long ago that Dollar Tree found it necessary to broadly raise its prices so that it was no longer a pure-play "dollar store," but by keeping most prices at the $1.25 range and adding in a wider selection of goods in the $2 and $3 range, it was able to increase the quality and number of name-brand products it was able to carry.
As economic concerns have grown, so has Dollar Tree's stock, which is up 17% in 2022. It's nearly doubled from the low point hit last September. Yet even though it's not the bargain-basement stock the others on this list represent, this retail stock has plenty more room to grow, especially if the economy sours further.
Image source: Dutch Bros.
3. Dutch Bros
Drive-thru coffee shop Dutch Bros (BROS -3.59%) was hurt by rising commodity costs, particularly dairy, which rose 25% in the first quarter and accounts for 28% of its commodity expenses.
Even so, revenue was up 54% for the period, and comps were up 6% year over year, while it remains profitable on an adjusted basis. The coffee chain is growing faster than rival Starbucks, and it's in the early stages of expansion.
Dutch Bros has 572 stores in 12 states, giving it significant room for more growth, and it plans to open as many as 130 locations this year, five more than originally planned. It reiterated its guidance for full-year revenue of $700 million to $715 million, and though inflation will weigh on profitability, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is expected to be $90 million, 10% above last year and 30% higher than two years ago.
However, analysts forecast revenue to triple over the next five years, and Dutch Bros. should be regularly reporting profits on a GAAP basis. This fast-growing coffee stock could just be the jolt your portfolio needs in the years to come.
