Let's start with the bad news. No one can accurately predict when the next bull market will emerge. But here's the good news. A bull market will happen. History shows us bear markets eventually are followed by periods of strong performance. So, as investors navigate today's difficult market, they should prepare for the brighter days ahead.
And right now is the perfect time to start. Many fantastic companies have suffered this year -- but have what it takes to rebound and flourish in a bull market. Today, investors have the opportunity to grab shares of these players at great prices. So why wait? Consider these three smart buys to pick up before 2023.
1. Amazon
Amazon (AMZN 1.29%) may have delivered a lot of packages this year. But the e-commerce giant hasn't delivered share performance. The stock is heading for a 45% decline. Investors have been disappointed in Amazon's earnings over the past year. Higher inflation has weighed on the company's costs -- and it's hurt customers' buying power.
These problems aren't over. And that means Amazon's earnings may not recover overnight. But that doesn't change Amazon's bright long-term picture. It's important to keep in mind that today's economic challenges are temporary. And Amazon has the strength to weather the storm.
Here's why I'm optimistic. Amazon is a leader in two markets growing in the double digits: e-commerce and cloud computing. In e-commerce, Amazon has grown its Prime subscription membership. And these members are spending more and relying more on Amazon for goods and services. This should pay off when the economic environment improves.
As for cloud computing, Amazon Web Services (AWS) continues to grow in the double digits. And Amazon has reinforced investment in this key business. AWS generally drives Amazon's operating income.
Amazon also is reviewing its cost structure. This will help it through the difficult times and also should favor profitability once a bull market takes shape.
Today, Amazon shares trade at their lowest in relation to sales since 2015. So now is clearly a smart time to get in on the story.
2. Starbucks
Starbucks (SBUX -0.35%) shares have outperformed the broader market this year. But they're still heading for a 12% decline.
And the stock is trading for 29 times forward earnings estimates -- down from about 40 earlier this year.
Here's why this looks like a deal. First, Starbucks continues to grow revenue in the double digits. In the most recent quarter, revenue climbed 11% to a record $8.4 billion.
What's driving the gains? Starbucks' loyal fans. Starbucks Rewards members accounted for more than half of spending in U.S. stores in the quarter. And this membership base keeps on growing. In the quarter, U.S. active Rewards members increased 16% to 28.7 million members.
Coronavirus restrictions in China have held back total revenue potential. So, you can imagine Starbucks doing even better in the future. That future may be soon. China recently loosened restrictions. That should offer Starbucks a boost, especially since China is the company's second-biggest market after the U.S.
Another reason to be positive about Starbucks has to do with its recently launched "reinvention" plan. The company plans on focusing on several growth areas. For example, it will boost store licensing opportunities -- they tend to lift return on invested capital. Starbucks also aims to strengthen beverage innovation and open new stores to meet consumers' needs.
The goals are to deliver annual double-digit revenue growth and non-GAAP (EPS) earnings-per-share growth.
All of this means there are plenty of share price catalysts just ahead. And you may benefit if you scoop up these bargain shares right now.
3. Walt Disney
Walt Disney (DIS 1.54%) has reached an important transition point. The entertainment giant recently brought back one of its star chief executive officers. The move was meant to cut costs and kick-start growth. CEO Bob Iger will stay on for two years, then name a successor.
There's reason to believe Iger is the right person for the job. He led Disney through key acquisitions -- such as Marvel -- and was the CEO when the company launched blockbuster film Frozen. Disney's market value also soared during his tenure.
Disney isn't starting off from an extremely weak point. The company's theme parks remain favorites around the world. And revenue is climbing.
The parks, experiences, and products unit posted a 73% increase in revenue in the recently ended fiscal year. And the unit's operating income more than doubled from the year-earlier period to $1.5 billion. Spending in the parks also is on the rise. Per-capita spending climbed almost 40% from fiscal 2019. Strength in this unit is key since it generally represents the most revenue for Disney.
At the same time, losses have deepened at Disney's streaming services. The company has invested heavily to expand this business and gain subscribers. Recently, Disney increased the price of its ad-free streaming service. That should help the company as it tries to move this unit toward profitability.
Disney trades for 22 times forward earnings estimates. That's down from about 40 earlier this year. Considering the ongoing strength of the parks business and Iger's return, right now is a great time to buy. If Iger makes progress on at least some of his goals, Disney truly could stand out during a bull market.
