Eighteenth-century British nobleman Baron Rothschild coined the phrase "buy when there is blood in the streets." While it's not always a good idea to buy a stock just because it's down, high-quality cyclical companies can be great long-term buys when their industries look grim in the near term.

That's why I'm still sticking with the following high-quality names. Each of these companies reported some rough-looking earnings results last week; yet despite that, both belong on your buy list today due to their competitive advantages and long-term growth prospects.

Micron Technology

There's no getting around it; Micron Technology (MU 2.92%) reported absolutely dismal earnings last week. Year-over-year revenue fell a stunning 52.6%, and adjusted (non-GAAP) EPS was negative $1.91, a massive loss that included over $1.4 billion of inventory write-downs. Not only were these ugly looking numbers, they even missed analyst expectations.

Yet the day after those very earnings were released, Micron's stock rose over 7%!

So what gives? Well, those who have followed the memory and storage industry know that the price of memory fluctuates a lot, alternating between boom and bust.

While we are clearly in a terrible "bust," remember, Micron is one of only three major DRAM producers, as well as one of only six major NAND flash producers -- five, actually, if one counts the potential merger of Western Digital and Japan's Kioxia, which is in advanced talks. Furthermore, Micron has a liquid balance sheet, with $12.1 billion in cash and $14.6 billion in liquidity.

With that amount of industry concentration, Micron has the market power to reduce some supply, at least in DRAM. And Micron is doing just that. On the call, management said it was now lowering wafer starts by 25%, from the 20% reduction announced earlier this year; reducing headcount by 15% this year, from 10%; and reducing capital expenditures to $7 billion, from a range of $7 billion to $7.5 billion last quarter. And Micron has even telegraphed lower capital equipment spending in 2024.

Also a positive: Earlier this quarter, competitor SK Hynix also said it would lower its capital spending to reduce supply by similar amounts.

These drastic measures are happening as PC unit sales have suffered their worst year-over-year declines in history due to the 2022 hangover from the height of the pandemic. Mobile phones have also declined more than expected, and even the high-growth data center market has slowed of late.

However, on the conference call with analysts, CEO Sanjay Mehrotra said Micron's data center revenue likely bottomed last quarter. Moreover, the emerging artificial intelligence wars could be a tailwind heading into next year, as AI-based servers for applications such as ChatGPT, Bard, and others require about 8 times the DRAM and 3 times the NAND flash as a normal server. And a lone bright spot continues to be auto demand, where Micron actually grew revenue 5% year over year, with the leading market share in that space.

Micron also leads the industry in technology, as it was the first to produce 1-beta DRAM and 232-layer NAND last year. Mehrotra also noted Micron's yields on 1-alpha and 176-layer NAND are the highest in the company's history, and that the newer 1-beta DRAM and 232-layer NAND are also hitting yield targets well ahead of schedule.

The memory industry is in a severe decline these days, but that is really due to mature products such as PCs and phones declining by historical amounts following the pandemic. Going forward, booming AI server and auto chip growth will lead those verticals to make up a larger share of the industry.

With suppliers now cutting back severely on supply growth, boom times for the industry should eventually arrive -- maybe sooner than some think. Given Micron's new technology lead, the stock looks attractive more than one-third off its highs.

RH

The housing market has been frozen by higher mortgage rates, which deter buyers and halt remodeling. Meanwhile, those who have locked in a low-rate fixed mortgage are unlikely to move.

That's a perfect storm for RH (RH 2.28%), the luxury furniture retailer. In fact, it's even worse, as luxury home market sales were down a whopping 45% in the recent quarter. And with RH's business somewhat dependent on new home sales, renovation, or remodeling, the current high-rate environment and post-pandemic hangover are really hurting RH's business.

Given the horrid industry conditions, RH's revenue decline of 14.4% last quarter doesn't look so bad by comparison. And RH management also took a very conservative view of 2023, forecasting about $3 billion in revenue at the midpoint and adjusted operating margin between 15% and 17%, down from $3.59 billion and 22%, respectively, in 2022.

But remember, these numbers are being forecast in an environment that's about as bad as it can get. Yet in 2023, RH has a number of initiatives going to boost long-term growth, including its first foray into international markets.

In 2023, RH will open The Gallery at the Historic Aynho Park, a 73-acre, 17th-century estate in the English countryside, its first design gallery outside the U.S. This gallery was supposed to open last year, but labor and construction delays pushed it off into 2023. And in the next 18 months, RH will open more European galleries in Brussels, Dusseldorf, Munich, and Madrid, followed by Paris, London, Milan, and Sydney in 2024 and 2025.

Keep in mind, this international expansion is part of what is weighing on the 2023 margin guidance, by about 150 basis points. So, RH's high-end furniture aimed at the wealthy still seems like a very profitable business, even in a down market. Management is also showing confidence by ramping up share repurchases. Last year, RH repurchased $1 billion of stock at a price of $269, good for about 13.5% of all shares outstanding.

If RH's international expansion pays off, the company could see some eye-opening growth coming out of this downturn, and those repurchases at low prices could further turbocharge earnings per share. While the next year may see the stock continue to languish, RH is another name long-term investors shouldn't hesitate to buy on its recent dip.