Inexperienced stock investors will often panic and sell when there's a stock market downturn. Experienced investors, though, will often open their wallets and start snapping up shares of companies they'd love to own a piece of.
That's because a market downturn puts the stocks of many fine companies on sale, and if you aim to hang on to those shares for years, buying after a market drop can be a savvy and powerful move. Here are three stocks that are somewhat reasonably valued now, but which can be terrific long-term holdings if you can buy at an even lower price.
1. Starbucks
With more than 36,000 locations worldwide, Starbucks (SBUX 0.47%) is familiar to most of us. It's slinging not just a wide range of coffees, but also teas, food, and other items -- including brands such as Teavana and Ethos Water.
The company has been growing well for decades. Its last quarterly report, reflecting its second quarter of 2023, showed net revenue up 14% to $8.7 billion, the operating profit margin rising from 17% to 19% year over year, and the addition of 464 net new stores.
The company's membership program is growing briskly, too. It's up 15% over prior-year levels. Starbucks is also boosting its top line via innovative additions to its offerings. Growth in China may fuel the fortunes of Starbucks as well.
Starbucks even pays a dividend -- which recently yielded 2.1%. Over the past five years, it has been increased by an annual average of 12%. Both the company's price-to-earnings (P/E) and forward-looking P/E ratios were recently below their respective five-year averages, suggesting a degree of undervaluation. So you won't necessarily go wrong buying now -- but if you can snag a lower entry price, you'll be positioned to profit more.
2. Sysco
If Sysco (SYY) is a vaguely familiar name to you, it's probably because you've seen lots of Sysco trucks near you on the highway. It has more than 13,000 of them on the road, as it's a major distributor of food products to the restaurant, healthcare, and education industries. The company employs more than 70,000 people and boasts a network of 333 distribution facilities worldwide. Altogether, these assets help it bring in more than $70 billion annually, and have earned it a market value north of $35 billion.
Sysco isn't a fast-growing hot stock, but it's a rather dependable long-term grower. And its recent growth rate isn't too shabby, either: Its third-quarter earnings report featured revenue up nearly 12% year over year and operating income up 40%. CEO Kevin Hourican noted:
Our supply chain network delivered meaningful, sequential efficiency gains with improvements in retention, productivity, and operating expense leverage. We advanced our Recipe for Growth strategy with progress made with our digital tools and sales and merchandising initiatives. ... We delivered strong sales growth throughout the quarter, despite some industry softness beginning in March.
Sysco's P/E ratio and forward P/E ratio are both well below their five-year averages. The company's dividend recently yielded a solid 2.7%, and it has grown by about 7% annually, on average, over the past five years.
3. American Express
American Express (AXP -0.62%) needs little introduction. Founded in 1850, it has grown into a $130 billion financial services giant. It's perhaps primarily known for its powerful credit card business (it boasts the third-largest credit card network in the world), but it's also active in banking, travel, and business services, among other things.
American Express is also still growing, with first-quarter total revenue (net of interest expense) up 22% and management projecting further revenue growth of between 15% and 17% in the rest of the year. American Express is a luxury brand, and targets higher-end customers. It's adding millions of cards each quarter, and is seeing the most growth among millennial and Gen Z customers.
You don't even need to take my word that American Express is a stock worth serious consideration. Superinvestor Warren Buffett agrees. He owns about 20% of the company's stock through his own company, Berkshire Hathaway.
American Express is another dividend-paying stock, with a recent yield of 1.4% and a five-year-average annual dividend growth rate of 11%. The company's P/E ratio and forward P/E ratio are both well below their five-year averages.
These are just three of many terrific companies out there, some of which are bargain-priced now and some of which may be bargains after a market downturn. Take a close look at any that interest you.
