A New Bull Market Is in Sight: 3 Stocks to Buy Sooner Rather Than Later

There's something special about two percentages -- 8% and 9%. They're how much the Nasdaq Composite Index and S&P 500, respectively, need to climb to reach bull market territory. The Dow Jones Industrial Average only needs to rise another 5% or so.

The gaps might not be easy to close, but a new bull market is in sight. Smart investors will prepare accordingly. Here are three stocks to buy sooner rather than later.

1. Amazon

Amazon's (AMZN -1.65%) share price is still nearly 50% below the previous high despite rising by a double-digit percentage year to date. The last time the stock was beaten down so much (back in 2008), it delivered a gain of more than 40x over the next 10 years.

With the company's market cap now close to $1 trillion, don't bet on a repeat performance. However, Amazon appears to be a bargain at its current price. Noted value investor Bill Miller said last month that he thinks the stock should rebound strongly. He added that he views Amazon as "one of the easiest names in the market right now." The consensus Wall Street price target for the stock reflects an upside potential of more than 40%.

One key reason to be bullish about Amazon over the near term is that its profits and free cash flow should increase. That's because the company has cut costs and continues to streamline operations. This should especially help when inflation moderates, which should lead to more robust revenue growth.

But there's even more reason for enthusiasm about Amazon's long-term prospects. In particular, the company's Amazon Web Services unit has a massive growth opportunity as organizations shift their IT spending to the cloud. A surge in AI-powered apps should also fuel this growth.

2. Axsome Therapeutics

Axsome Therapeutics (AXSM 0.49%) is off to a poor start in 2023 after the biotech stock more than doubled last year. However, the current pullback presents a great buying opportunity.

The company's prospects haven't diminished one bit. Auvelity, which won U.S. Food and Drug Administration (FDA) approval in August 2022 for treating major depressive disorder, continues to gain momentum. Axsome acquired worldwide commercialization rights to sleep-disorder drug Sunosi from Jazz Pharmaceuticals. It's marketing the drug in the U.S. and licensed European marketing rights to Pharmanovia.

Axsome also has several potential catalysts on the way. It expects to submit for FDA approvals of AXS-07 in treating migraine and AXS-14 in treating fibromyalgia later this year. The company should report results from a late-stage clinical study evaluating experimental drug AXS-12 in treating narcolepsy in 2023 as well. 

Analysts think that Auvelity could achieve peak annual sales of in the ballpark of $1.8 billion. AXS-07 also has the potential to be a blockbuster. These two drugs alone make Axsome's valuation look attractive with the company's current market cap of $2.7 billion.

3. MercadoLibre

MercadoLibre (MELI -0.45%) is the biggest winner of these three stocks so far this year. The Latin American e-commerce and fintech stock is up more than 35%. I think it has plenty of room to run and just might hit its all-time high in 2023.

E-commerce is MercadoLibre's biggest moneymaker. Since 2019, the company has increased its gross merchandise volume by 2.5x. It continues to perform especially well in Brazil and Mexico. MercadoLibre's e-commerce platform also helps it gain business in other areas, notably including logistics and advertising.

I'm even more bullish about the company's Mercado Pago fintech business. Fintech revenue has increased by nearly 5x over the last three years. Mercado Pago now has nearly 44 million unique active users. It still has huge growth potential in Mexico and Chile as well as in serving larger merchants in Brazil. 

What if the bear market continues?

My view is that Amazon, Axsome, and MercadoLibre will soar if a new bull market begins. But what if the bear market continues? I think that Axsome stock should perform well either way. Amazon and MercadoLibre could have a harder time if an economic downturn causes the overall stock market to fall. However, all three of these stocks should deliver market-beating returns over the long run.