Last year, the Nasdaq Composite index plunged 33% as macroeconomic headwinds brought down the whole market. The pull-back caused stocks in some of the world's most valuable companies to effectively go on sale, prompting countless buying opportunities.
The market has gradually begun recovering alongside easing inflation in 2023. However, the cost of living remains high, with the consumer price index rising 4.9% in April. As a result, it's not too late to take advantage of stocks that could soar once economic challenges subside.
Here are three stocks to add to your portfolio in a market pull-back.
1. Amazon
With Amazon's (AMZN -1.65%) business focused on e-commerce and cloud computing, an economic downturn has hit the company particularly hard. High inflation reduced consumer spending on its online retail site, while businesses tightened their budgets on cloud spending.
However, both markets have vast potential over the long term. The e-commerce market on its own is projected to achieve a value of $4 trillion this year. Meanwhile, online sales only made up about 15% of all retail purchases last year, indicating the market is nowhere near hitting its ceiling. As a result, Amazon's leading market share in the sector could massively pay off once inflation improves and consumers can spend more freely.
Moreover, the company's cloud platform, Amazon Web Services, has similar potential thanks to its dominance in the industry. Data from Grand View Research states the cloud market is projected to grow at a compound annual growth rate of 14% through 2030 and could be further boosted by a current boom in artificial intelligence.
Amazon's stock climbed 35% in 2023 as investors have rallied as inflation's eased. However, at about $113 a share, it still has a long way to go before returning to its year-over-year high of $145 it achieved last August. As a result, Amazon is a bargain buy compared to its potential.
2. Disney
The challenges facing e-commerce and the cloud market have similarly affected entertainment companies as consumers pulled back on discretionary spending. Consequently, Disney (DIS -1.01%) shares fell 44% in 2022 and remain down 14% for the year. However, the company's valuable content library and dominance at the box office and in theme parks suggest it has much to offer once the market improves.
In Disney's second quarter of 2023, all eyes were on its loss of 4 million subscribers from its flagship streaming service, Disney+. While the decline is a short-term concern, not all hope is lost for the digital business. Financially, Disney's direct-to-consumer (streaming) segment seems to be on a growth track. Second-quarter 2023 saw Disney's streaming revenue rise 12% year over year while operating losses improved by 26%.
As Disney's direct-to-consumer segment heads toward profitability, the company's parks business continued to thrive since they reopened in 2022. The most recent quarter saw revenue rise 17% year over year for Disney parks, hitting close to $8 billion.
Disney has had a rough few years with the COVID-19 pandemic, followed by an economic tumble. Yet, its average 12-month price target of $126 projects stock growth of 38%, making this entertainment giant's stock a must-buy after a sell-off.
3. Apple
While Amazon and Disney make excellent investment options because of their potential once market headwinds improve, Apple (AAPL 0.52%) is a smart option for building stability into your portfolio.
The chart below shows that Apple was one of the only companies to outperform the Nasdaq last year amid a sell-off.
Data by YCharts
The iPhone company has continued to beat the market in 2023, with its stock up 32% year to date compared to the Nasdaq Composite's rise of 18%. Apple's reliable growth over the years makes it one of the best investments to keep your portfolio in good form, no matter the economic climate.
The company's reliability is primarily thanks to its almost unparalleled brand loyalty, which has kept product sales high despite its competitors suffering from reduced spending. For instance, Q1 2023 saw smartphone shipments from companies like Samsung and Xiaomi fall by 18.9% and 23.5%, respectively (per IDC). However, in the same time frame, Apple reported a 2% year-over-year rise in revenue in its iPhone segment.
As a result, a market pull-back is an excellent time to buy Apple, with its industry dominance likely to fortify your holdings.
