U.S. stock markets are going through an unusually volatile period, thanks to the uncertainty posed by the global banking crisis and the Federal Reserve's plan for interest rates. While wild price swings can be nerve-racking for shareholders, choppy markets can also be a great time to pick up shares of top companies at significant discounts to their intrinsic value.
Which growth stocks are on watch for a possible entry point? International insurance products and services company Brown & Brown (BRO -0.59%), diverse financial holding company Markel (MKL -1.32%), and medical device/software company ResMed (RMD -2.49%) are three names that bargain hunters ought to have on their radars right now. Here's why.
Image source: Getty Images.
Brown & Brown
Brown & Brown is a diversified insurance company with an 84-year operating history. Through its growth-by-acquisition business model, Brown has grown significant commercial footprints in the areas of property, casualty, and employee benefits both inside the U.S. and globally. Now, the insurance company's annualized dividend yield of 0.85% is well below the 1.75% average yield of stocks listed on the S&P 500. But Brown's management has proven its dedication to rewarding loyal shareholders by boosting the dividend for 29 consecutive years.
Why is this insurance stock a top buy in a volatile market? Brown's core business model is largely recession-proof, given that most customers can't simply drop their insurance products to save money in a tight economy. Moreover, the company is on track to grow its top line by 19.1% over the next 24 months. That's a blistering level of revenue growth for a mid-cap insurance agency. All told, this diversified insurance stock is worth considering due to the economically insensitive nature of its core revenue streams, its long-held tradition of paying a dividend, and its strong near-term outlook.
Markel
Markel is a diversified holding company. The company operates via three core segments: specialty insurance products, investments, and Markel ventures. Although Markel's stock lagged the broader markets during the last bull market, its recession-proof insurance business ought to appeal to investors in the current risk-averse environment. On the flip side, Markel's high level of exposure to a diverse range of stocks, via its investment wing, could weigh on returns in the event of another market-wide correction.
Why is Markel stock worth checking out right now? Barring a black swan type event that drags the entire market down, Markel's stock ought to deliver solid returns for shareholders in 2023 and beyond. Underscoring this point, Wall Street analysts think this mid-cap growth stock is undervalued by a noteworthy 24% at current levels. This bullish forecast stems from Markel's rapidly growing top line, which is expected to surge by a healthy 34.8% over the next two years. Overall, Markel sports a thriving insurance business, an attractive valuation, and a varied equity portfolio that provides an instant form of diversification.
ResMed
ResMed is a medical device and software-as-a-service (SaaS) company that specializes in the treatment of sleep-related respiratory disorders such as obstructive sleep apnea (OSA). The company currently operates in 140 countries, but North America (mainly the U.S.) is its biggest customer by a wide margin at the moment. Within the sizable OSA space, ResMed is the market share leader in most countries in which it operates, with Philips taking second place in several key geographies.
The OSA market ought to provide an enormous growth opportunity for ResMed in the years ahead. Wall Street analysts estimate that only half of patients diagnosed with OSA are currently using a device, and another 34 million Americans with OSA are presently undiagnosed. Moreover, emerging markets for this sleeping disorder remain largely untapped. This sizable medical device market is expected to help boost the company's top line by a stately 23% over the next two years.
The downsides to this medical device and SaaS stock are that it isn't cheap at 28 times forward earnings and its dividend yield of 0.84% is fairly modest. That said, this premium valuation is indeed warranted in light of the dependability of its revenue stream, its immense expansion opportunities in both the U.S. and internationally, and its burgeoning competitive moat. Bottom line, ResMed is an all-weather stock that investors can feel comfortable owning in any kind of market.