Our best stocks to buy amid the market correction
The stock market made a sudden U-turn. After rebounding strongly last year, it has sold off strongly in recent weeks. It officially entered correction territory this week, defined as a 10% decline from the recent high.
Although stock market corrections can be difficult to bear, they often present great opportunities to buy high-quality stocks at lower prices. With that in mind, we asked some of our contributors for their top stocks to buy amid this year’s market decline. This is why they believe Nucor (NYSE: NUDE), NextEra Energygy (NYSE:NEE)and Nio (NYSE: NIO) look like good buys during the current sale.
A big sale would be a welcome opportunity
Reuben Gregg Brewer (Nucor): Steelmakers are very cyclical and right now the companies are experiencing a strong operating environment. There are hints that this could change, but for now record and near-record results are the norm for US steel giant Nucor. It is probably the best run plant in North America. There are so many good things to say about Nucor it’s hard to know where to start.
It is the largest and most diverse actor. It holds a No. 1 or No. 2 position in 12 different industry sectors. Its investment grade rated balance sheet is one of the strongest in the domestic market. It has a long history of investing for the future, particularly using downturns as weaker peers often just try to survive. That said, the thing that still impresses me the most is how it treats its employees and shareholders.
Nucor has a profit sharing agreement that rewards its workforce well when the business is doing well. But, when times are tough, employees earn less. The good times are so bountiful it’s a lot, and at the same time it gives Nucor a break from payroll expenses when it needs help. For investors, Nucor is a dividend aristocrat, having raised its dividend for 48 consecutive years. The stock is quite expensive today, but a sharp drop related to broader market issues would be an opportunity to acquire a large company, particularly if the yield hits something in the 3% range.
This industry leader is much cheaper
Matt DiLallo (NextEra Energy): NextEra Energy shares have taken a hit this year. the utility stock fell more than 20% in the first weeks of 2022. That’s an astonishing drop for such a quality company with a solid track record. It has now given up most of last year’s gains when it generated a total return of 23%, outperforming the utilities sector. This is something he has done in each of the previous three, five, 10 and 15 year periods.
As the overall market correction triggered the sell-off, the company the recent management transition also seemed to scare off investors. Investors seemed overly concerned that longtime CEO Jim Robo was considering stepping down in March. They forget that he is passing the baton to a 19-year veteran who has worked alongside the value-creating CEO for decades.
Investors also completely ignored NextEra’s strong fourth quarter results and improved financial guidance. It increased its adjusted earnings per share by 10.4% last year, above its long-term target range of 6% to 8%. Meanwhile, it is seeing double-digit earnings growth again in 2022. It also forecasts earnings growth of 6% to 8% in 2023 from this year’s higher base while extending its outlook to 2023. in 2025. The company’s focus on investing in renewable energy is helping to drive faster growth.
This year’s sell-off has now allowed NextEra to trade energy at around 26 times forward earnings. While it’s a bit more expensive than the average utility, it’s significantly cheaper than the multiple of over 35 times the forward earnings it earned before the sale.
This cheaper price, combined with NextEra Energy’s improved outlook, makes it a great buy amid this year’s stock market correction.
A top bet to play the EV megatrend
Neha Chamaria (Nio): Given the rapid pace at which electric vehicle (EV) sales are growing, I wouldn’t hesitate to put my money on some EV stock during a massive sale. Right now, for example, my eyes are on Nio – shares of the China-based electric vehicle maker are down nearly 30% in the last month alone, at the time of this writing.
Specifically, there are three reasons why I like Nio. First, Nio is a bet on the world’s largest electric vehicle market, China, where demand for new energy vehicles is growing at a blistering pace. Nio is also pushing to establish a footprint outside of China, which is my second reason to be bullish on the stock. By 2025, for example, Nio plans to expand its presence to 25 countries and regions by 2025, with immediate plans including entering more European markets after already launching its vehicles in Norway last year. .
Last but most importantly, Nio is gearing up to begin deliveries of two models this year: its flagship ET7 sedan and the highly anticipated ET5 midsize sedan. There’s a lot more to do at Nio, including a possible secondary listing on the Hong Kong stock exchange (or maybe even Singapore, as rumors are circulating at the moment). Electric vehicles are changing the dynamics of the auto industry, so it makes sense for an investor to own electric vehicle stocks. Nio is just one of those compelling electric vehicle titles that looks set to rally once market fears ease.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.