Stock Market Plunge: 3 Discounted Stocks to Buy Now and Never Sell

There is no doubt that it has been a challenging year to be an investor. Since hitting all-time highs in the first week of January, the iconic Dow Jones Industrial Average and widely supported S&P 500 fell by 13.5% and 18% respectively on 11 May.

For the growth stock dependent Nasdaq composite, it’s been an even more painful drop. After its highest point six months ago, the index is down 29%.

While big moves lower in the stock market can be scary and pull on investors’ emotions, it’s important to recognize that corrections (and even bear markets) are a normal and unavoidable part of the investment cycle. When viewed through a broader lens, every notable decline in major indices throughout history has proved to be a buying opportunity for patient investors.

Image source: Getty Images.

More importantly, as the market plummets, deals with high-value companies become more apparent. What follows are three discounted stocks that long-term investors can now buy with confidence and likely never have to sell.

Berkshire Hathaway

If there’s one stock that has definitely shown it can stand the test of time, it’s its conglomerate Berkshire Hathaway (BRK.A 0.73%(BRK.B 0.75%† Berkshire is the company headed by billionaire Warren Buffett.

Since taking charge in 1965, Buffett has overseen the creation of more than $680 billion in value for shareholders (including himself), and has achieved an average annual return of 20.1%. In total, we are talking about an increase of more than 3,600,000% for the company’s Class A shares (BRK.A). While Berkshire Hathaway is prone to down years, there is a track record long enough to show it regularly outperforms the S&P 500 over extended periods.

One of the reasons Berkshire Hathaway is such a smart investment is Warren Buffett’s love of cyclical companies. A ‘cyclical’ company performs well when the US or global economy is growing, and can struggle when recessions or slowdowns occur.

The Oracle of Omaha is well aware that recessions are an inevitable part of the economic cycle. Rather than trying to time when they will happen, he has crammed Berkshire Hathaway’s portfolio with companies that thrive during periods of expansion. The point is that expansions last significantly longer than recessions, which puts Buffett’s portfolio in a perfect position to take advantage of the natural expansion of US and global gross domestic product. It’s a boring strategy that pays off well over time.

Berkshire Hathaway’s other not-too-subtle secret to success is the mountain of passive income it receives. After major investments in Chevron and Verizon over the past two years, Buffett’s company appears to be on track to generate more than $6 billion in annual dividend income. Because dividend-paying companies are often profitable and time-tested, they are better equipped to withstand an economic downturn.

Historically, any double-digit percentage drop in Berkshire Hathaway’s stock has been a green light for investors to start shopping.

A smiling person holding up a credit card with their right hand.

Image source: Getty Images.

MasterCard

A second discounted growth stock that investors can buy now and never have to worry about selling is the payment processor. MasterCard (MA 3.60%

Like Berkshire Hathaway, Mastercard is not immune to economic downturns and recessions. If consumers and businesses cut spending, Mastercard’s revenue and profits are likely to fall. The mounting prospect of a recession in the US is likely the reason the company’s stock is down nearly 20% from their all-time high.

However, there are plenty of reasons to be excited about Mastercard’s long-term opportunities. For starters, it is a major player in the leading consumer market: the United States. According to the Securities and Exchange Commission filings of the four major credit card networks, Mastercard was responsible for nearly 23% of the purchase volume of credit card networks in the US in 2020. That’s a lucrative position as economic expansion significantly outpaces recessions.

Investors can also rave about and take comfort in the fact that Mastercard acts strictly as a payment processor. While it probably wouldn’t be a problem to generate interest income and fees as a lender, lender means being exposed to delinquent loans during recessions. Since the company does not provide loans, there is no need to set aside capital during recessions. This explains why Mastercard can recover faster than most financial stocks after a downturn in the US or the global economy.

Speaking of the global economy, the majority of transactions are still cash. Mastercard has a long track record of expanding its payment infrastructure into emerging markets organically or through acquisition. By relying on predictable cash flow from developed countries and accelerated growth in emerging markets, Mastercard should be able to sustain long-term annual growth of approximately 10%.

Mickey and Minnie Mouse welcome guests to Disneyland.

Image source: Disneyland.

Walt Disney

The third discounted stock that just begs to be bought and never sells is the theme park operator and amusement queen Walt Disney (DIS 2.90%† The company’s shares are nearly 44% below their 52-week high.

Undoubtedly, the biggest problem for Disney over the past two years has been the unpredictability of the COVID-19 pandemic. Excuse the pun on the theme park, but it seemed like a merry-go-round of park closures and mitigation measures needed to fight COVID-19. In the company’s latest quarterly report, it cited closures in Hong Kong and Shanghai as negatively impacting Disney Park’s revenue.

While closed theme parks aren’t ideal, the growing consensus among researchers seems to be that we’ve passed the worst of what COVID-19 and its variants have to offer. While it would be preferable if China’s response to COVID-19 cases were more in line with the rest of the world, the key point is that theme park disruptions are not a long-term concern.

Aside from eventually getting past the headwinds of COVID-19, Walt Disney continues to impress on the streaming front. At the end of its fiscal second quarter (April 2, 2022), Disney+ had 137.7 million subscribers, a 33% increase from the same period last year. Average monthly revenue per global subscriber was up 9% from the second quarter of 2021, with the company pointing to strength in existing markets and retail price increases.

Another reason House of Mouse makes such a no-brainer investment is its pricing power. Disney has a huge library of original content that helps it connect with people of all ages. Not to mention that the theme parks can make everyone feel young again. Walt Disney has never had a problem passing on price increases to consumers and is therefore able to stay well ahead of prevailing inflation.

While Disney faces its fair share of short-term headwinds, the long-term future remains bright.

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