There's little question that 2022 is set to go down as once of the most challenging years for investors on record. Through the first six months of the year, the benchmark S&P 500 produced its worst return since 1970. That doesn't happen by accident. It's a function of historically high inflation, persistent supply chain problems, and a weakening U.S. economy.
Things have been even worse for the tech-centric Nasdaq Composite (^IXIC -2.05%), which has lost as much as 34% of its value on a peak-to-trough basis since hitting its closing high in November. The magnitude of the Nasdaq's decline has kept the widely followed index firmly entrenched in a bear market.
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However, peril on Wall Street often begets opportunity. That's because every significant decline in the major indexes throughout history (including the Nasdaq Composite) has eventually been put into the rearview mirror by a bull market rally. Sometimes, bear markets roll out the red carpet for patient investors and offer once-in-a-generation buying opportunities. What follows are three beaten-down companies that have once-in-a-generation buying appeal for long-term investors.
Intel
The first buying opportunity you may never see again is the chance to load up on shares of semiconductor giant Intel (INTC -2.40%) below $30.
To be fair, Intel and its semiconductor peers are facing a mountain of headwinds at the moment. Supply chain issues and historically high inflation are doing a number on enterprise demand. Meanwhile, the return of workers to the office has lowered demand for personal computers (PCs).
In spite of these challenges, Intel and its 5.1% dividend yield could be a phenomenal buy for patient investors.
To begin with, rumors of Intel's demise appear to be greatly exaggerated. Based on data compiled by Mercury Research for the first quarter of 2022, Intel held 88.4% of server central processing unit (CPU) market share, along with an 81.7% share of desktop PC PCUs, and a 77.5% share of mobile PCUs (excluding Internet of Things devices). Even with Advanced Micro Devices slightly chipping away at its market share in server and mobile PCUs, it's evident that Intel's top-dog status in processors will continue to be a source of incredible cash flow for the company.
To add to this point, businesses have been shifting data into the cloud at an accelerated pace in the wake of the COVID-19 pandemic. This bodes well for data-center server demand for years to come.
Another significant tailwind for Intel is the recent passage of the CHIPS and Science Act, which President Joe Biden signed into law last month. The CHIPS Act will provide nearly $53 billion in subsidies to chip manufacturers and designers so they can build facilities to produce and hire domestically. As businesses, homes, and cars become more technologically dependent, the need to manufacture semiconductor solutions is only going to climb. That's a key impetus behind Intel's $20 billion investment to build two manufacturing plants in Ohio.
Intel should also benefit from the eventual spinoff and initial public offering (IPO) of autonomous vehicle company Mobileye. Even with a lowered valuation of $30 billion for its upcoming IPO, this would be nearly double what Intel paid for Mobileye ($15.3 billion) five years ago. Mobileye's revenue hit a record $460 million (up 41%) in the second quarter.
Although it's struggling mightily amid economic uncertainty, now is the ideal time to pick up an absolutely dominant cash flow giant like Intel on the cheap.
Planet 13 Holdings
For the second once-in-a-generation buying opportunity, look no further than the U.S. cannabis space -- specifically, small-cap multi-state operator (MSO) Planet 13 Holdings (PLNH.F -6.00%), which can be purchased for a little over $1 per share.
In February 2021, marijuana stocks were all the buzz. Democrats narrowly taking hold of Congress following Joe Biden's victory in November appeared to pave the way for cannabis to be legalized at the federal level. But after 20 months in the Oval Office, Biden is no closer to signing marijuana reform bills into law than was his predecessor, Donald Trump. Wall Street has not been happy with the lack of progress on the reform front, and U.S. marijuana stocks have paid the price.
However, a lack of federal reform hasn't stopped individual states from giving the green light to medical marijuana and/or adult-use consumption. Roughly three-quarters of all U.S. states allow cannabis use in some form. With favorability to marijuana steadily improving over decades, federal reform is still likely sooner than later.
What makes Planet 13 such a game-changing stock to buy is its approach to expansion within the cannabis industry. Whereas most vertically integrated MSOs have attempted to plant their proverbial flags in as many legalized markets as possible, Planet 13 has just three operating dispensaries. The thing is, two of these three dispensaries are behemoths and unlike anything the cannabis industry has ever seen.
The company's flagship dispensary is the Las Vegas SuperStore in Nevada, just west of the Strip. This store spans 112,000 square feet (that's bigger than the average Walmart) and offers an unrivaled selection of dried cannabis and high-margin derivatives, such as beverages and edibles. Its other large retail location is in Orange County, California, about 15 minutes from Disneyland. The Orange County SuperStore spans 55,000 square feet, with 30% of this space devoted to selling. These stores focus as much on the customer experience as they do on sales, which is what makes them unique.
In addition to its SuperStore concept, which will be expanding to Chicago, Illinois, next, Planet 13 holds a dispensary license in Florida, which will allow the company to develop an unlimited number of community-based stores that total roughly 4,750 square feet once fully built out. Florida is on pace to be the nation's third-largest market for marijuana sales by 2024.
Planet 13's unique operating model makes it a no-brainer buy for long-term investors in the Nasdaq bear market.
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PubMatic
The third once-in-a-generation buying opportunity created by the Nasdaq bear market is none other than small-cap adtech stock PubMatic (PUBM 0.33%), which can be bought for less than $20/share.
Investors don't have to look far for evidence that advertisers have pared back their spending amid an uncertain economic environment. Following back-to-back quarters of declines in U.S. gross domestic product, all ad-driven businesses have been whacked by Wall Street -- and that includes PubMatic. But as noted earlier, peril begets opportunity.
One of the biggest factors working in favor of advertising companies like PubMatic is time. Even though recessions are an inevitable part of the economic cycle, they usually last for only a couple of quarters. By comparison, periods of expansion are measured in years. Simply being patient and holding onto an adtech stock like PubMatic should allow investors to take advantage of the natural growth of the U.S. and global economy over time, as well as the expansion of ad spending.
But PubMatic has more in its sails than just long-term growth trends. For starters, it's a programmatic-ad sell-side platform (SSP), which means its job is to help publishers sell their digital display space. Most SSPs have consolidated over time, leaving few options for publishers to choose from. This makes PubMatic a logical choice as businesses shift their ad dollars from print to digital.
To build on this point, PubMatic has been growing organically at a considerably faster pace than the digital ad industry as a whole. Whereas the digital ad industry is expected to generate 14% annualized revenue growth through 2025, PubMatic's organic growth rate has predominantly stuck between 25% and 50%. Again, it helps being one of the few SSPs for publishers to choose from.
Something else that really stands out about PubMatic is the company's choice to design and build its own cloud-based infrastructure. Instead of relying on a third party to handle its programmatic-ad solutions, PubMatic is set to benefit from economies of scale as its revenue grows. The end result should be higher operating margins than its peers.
If you still need more convincing, consider this: PubMatic ended June with $183 million in cash, cash equivalents, and marketable securities to go along with no debt. PubMatic can easily weather economic downturns while continuing to reinvest in its cloud-driven programmatic ad platform.
