Investors can call it a bear market. Investors can call it a market correction. Or, perhaps, investors can call it an opportunity.
The markets might be down, but that simply gives investors a chance to scoop up shares of excellent companies with long-term potential on the cheap. Here are two to consider.
Eyes on the prize
A little over a decade ago, General Motors (GM -0.04%) was an automaker that investors considered short-sighted and inept to handle the problems presented by the financial crisis -- and that was a fair criticism.
Fast-forwarding to today, and that criticism is no longer accurate. General Motors has arguably done more than any other automaker to reshape its image, and prove to investors it has changed its management philosophy to become a more forward-looking juggernaut.
The Detroit automaker has a slew of electric vehicles (EVs) set to hit the road in the truck, SUV, and luxury segments that will cover roughly 70% of the EV industry volume. GM has a new digital retail platform strategy with its U.S.-based dealers to enhance the consumer experience and, more importantly, reduce costs to GM by roughly $2,000 per vehicle.
GM is looking into the future with outside-the-box ideas such as BrightDrop, the automaker's tech start-up that focuses on eCarts and software -- basically, an electric ecosystem of first-to-last mile product delivery solutions. This is riding on the back of its EV platforms, which are expected to generate $1 billion in revenue in 2023.
With a focus on retail strategy, battery cost reduction, and improved manufacturing efficiency, GM expects to generate roughly $50 billion in EV revenue in 2025 and to do so at low- to mid-single-digit EBIT profit margins.
The automotive industry is evolving at an eye-popping pace, and General Motors has finally embraced change and formulated a compelling plan to thrive over the coming years. The bear market gives savvy investors a chance to jump on board at a fair price and a price-to-earnings ratio of only 5.6.
Brand image matters
If investors are looking for a company to buy during a bear market, there may not be a better option than a company that couldn't care less about a market downturn.
For Ferrari (RACE -1.04%), a market downturn is just another day because of its brand image, exclusivity, and wealthy target consumer. In fact, even during downturns, the company strategy remains the same: Only sell a limited number of vehicles, and profit handsomely.
Ferrari keeps a lid on the number of vehicles it sells, and likely always will. And with demand always exceeding supply, it fosters an impressive scenario that sends margins through the roof compared to historical automakers.
RACE Operating Margin (TTM) data by YCharts
If you're looking for proof, simply search the company's impressive third quarter that recorded double-digit gains in revenue, EBITDA, and EBIT, in the face of economic uncertainty, rising interest rates, and turbulent waters with industry chip shortages.
While Ferrari is a unique automaker for investors even during bear markets, the company isn't exempt from needing an eye for evolution and growth. Thankfully for savvy investors, the company has acknowledged such and initiated a strategy that it has long been avoiding: larger vehicles.
Ferrari will enter the SUV market with the Purosangue, which it does not call an SUV. The Purosangue will become available for purchase in 2023 and will give the company the ability to do something it hasn't yet done: charge an even higher price for a larger vehicle.
The finish line
The current bear market won't be the end of the automotive industry. Rather, it gives investors an opportunity to scoop up shares of excellent and forward-thinking companies at a discount. There's little doubt that General Motors and Ferrari will excel in the years ahead, and a bear market will hardly slow them down.
