The S&P 500 fell into a bear market in the first half of 2022, which means it is probably a good time to start looking for bargain-priced stocks. The key, however, is to look for industry leaders that have been put on sale. Don't try to buy the dip in overhyped areas that are pulling back from massive price spikes.
Far better options exist, including industrial giant 3M (MMM -0.14%), chip leader Texas Instruments (TXN 1.07%), and medical device powerhouse Medtronic (MDT 0.22%). Let's take a closer look at these three timely buys amid the current market sell-off.
1. 3M: A strong stomach
Industrial giant 3M is working through tough times and is probably most appropriate for more aggressive investors. Notably, it has been trying to reinvigorate growth at the same time that it has been facing some material legal headwinds. The dividend yield is a historically high 4.5%, suggesting that the stock is cheap.
But there are a lot of positives here, including that the company has a huge $70 billion market cap and an investment-grade balance sheet. It should be able to handle the legal headwinds it is facing today. As for getting growth back on track, 3M has a long history of innovation behind it. Technology breakthroughs are lumpy, but eventually, the company is likely to find another hit that it can put to good use throughout its portfolio. Meanwhile, the company's least profitable division had an operating margin of 17.1% in the first quarter of 2022, providing a strong foundation to support the company as it works toward better days.
2. Texas Instruments: If you build it...
Like industrials, chip stocks such as Texas Instruments operate in a cyclical industry. Investors are worried that there's going to be a near-term slowdown in demand, so Texas Instruments' stock has sold off, pushing the yield up to a historically high 2.8%. That's an opportunity for investors who think long-term because chip demand is far more likely to increase over time than it is to fall. The world is getting more digital, not less.
What's notable about Texas Instruments is that it doesn't make highly complex chips, preferring to focus on more simple fare that gets put into lots of different products. To put some numbers on this, the company has over 80,000 products and more than 100,000 customers. Its business is spread across the industrial, auto, consumer electronics, communications, and enterprise systems markets. And it has 15 manufacturing sites located around the world.
One key issue for investors today, meanwhile, is that management plans to build new chip factories that won't be up and running until 2025. The increased spending levels on this expansion appear likely to hit during an industry downturn, which isn't great, but it likely means that Texas Instruments will come out the other side a stronger company. That sounds like a good plan.
3. Medtronic: Missing the beat
Medtronic is in the healthcare industry, making medical devices in the cardiac, neuroscience, surgery, and diabetes spaces. This is a far more stable sector, but Medtronic has been dealing with some company-specific issues. For example, a new surgical robot is behind schedule, and the company is dealing with a product recall. But these things should pass in time and not alter the long-term trajectory of the company's growth. Notably, despite the headwinds, the company is expecting organic revenue growth of 4% to 5% in fiscal 2023.
Meanwhile, investors have pushed the stock lower along with the market. It currently yields a historically high 3%. That is an enticing entry point when you consider that the aging baby boom generation is likely to lead to a material increase in demand for medical care over the next couple of decades. With a leading industry position, it is hard to believe that Medtronic won't get its fair share of that business.
One more fact
Aside from strong business histories and historically high yields, all three of these companies share another trait. They each have a very long history of rewarding investors with annual dividend increases. The shortest streak is Texas Instruments at 18 years, with 3M in the Dividend King category and Medtronic sitting in the Dividend Aristocrat arena. If you are looking for stocks during the market's sell-off, each of these names is worth a closer look as their successful pasts suggest that their futures will be pretty good, too.
