The S&P 500 peaked in January 2022, with subsequent declines triggering a bear market. Analysts typically define a bear market as a 20% drop from recent highs, with a bull market not achieved again until stocks gain what they lost and surpass the previous high.
Data by YCharts
The chart above shows a bear market that is inching closer to a bull market as the S&P 500 nears its January 2022 high. As a result, now is an excellent time to get familiar with some of the best stocks to buy in a bull market and be ready to strike when the time is right.
Here are two top stocks to buy during the next bull market.
1. Amazon
Like the S&P 500, Amazon's (AMZN 0.58%) stock price has yet to surpass its previous high. The company hit $186 per share in July 2021 but remains about 20% below that. However, recent developments indicate shares could soar in the coming years as it becomes a crucial growth driver in the next bull market.
Data by YCharts
Macroeconomic headwinds curbed consumer spending in 2022, with Amazon experiencing steep declines in its e-commerce business. However, easing inflation and various cost-cutting measures have triggered a solid recovery for the retail giant this year.
In the third quarter of 2023, Amazon posted revenue growth of 13% year over year, beating Wall Street forecasts by $1.5 billion.
The spike was mainly owed to growth in its e-commerce division. The quarter saw Amazon's North American segment recorded more than $4 billion in operating income, improving on the $412 million in losses it posted in the year-ago period. A bull market is often a sign of a strengthening economy, which is positive for Amazon as it could mean increased sales on its retail site.
In addition to e-commerce, the company's leading market share in cloud computing with Amazon Web Services (AWS) gives it solid prospects in the future of artificial intelligence (AI). The AI market is projected to expand at a compound annual rate of 37% through 2030.
Meanwhile, Amazon is rapidly expanding its range of AI cloud tools on AWS in an effort to meet increased demand for such services.
Amazon's price-to-sales ratio (P/S) of 2.8 makes its stock an attractive option. Comparatively, competitors like Apple and Microsoft have P/S ratios hovering around 8 and 12, with Amazon's lower figure suggesting its stock offers more value. Alongside a recovering e-commerce business and a solid position in AI, Amazon is a no-brainer in a bull market.
2. Walt Disney
Walt Disney (DIS -0.12%) hasn't had it easy recently, with COVID-19 pandemic closures shuttering large parts of its business in 2020 and 2021. Then, an economic downturn last year made it challenging to expand in the streaming industry.
As a result, its stock has fallen 57% since the high it hit in March 2021. However, the company has restructured its business to prioritize profitability and could benefit significantly from a bull market.
Streaming has proved a major headwind over the last two years, resulting in considerable operating losses. Multiple price hikes throughout the last year for its various subscription services led Disney to gradually shrink these losses. From 2022 to fiscal 2023, the company's direct-to-consumer operating losses fell from more than $3 billion to $2 billion.
Meanwhile, the entertainment giant maintains that its streaming business will be profitable within the next fiscal year.
Moreover, visitors showed up to Disney's theme parks in droves in 2023 after they reopened, with its experiences segment reporting revenue growth of 16% year over year and a 23% rise in operating income.
However, the biggest vote of confidence in Disney's stock is the return of its dividend after it was halted during the height of the pandemic in 2020. The payout remains meager at 0.6%, but its return shows that the company is healing and that executives believe in Disney's long-term growth.
Disney's business is particularly vulnerable to economic fluctuation. However, it appears to be back on a growth path and is a screaming buy in a bull market. Its P/S of about 2 and forward price-to-earnings ratio of 21 are at one of their lowest points in years, making Disney stock a bargain right now.
