Bear markets, corrections, and crashes in the stock market may be frightening. They’re unpredictable, can lead to significant equity declines, and tug on investors’ emotions.
But spectacular falls in the overall market may be a great time to acquire high-quality stocks at a bargain. Even though the S&P 500 has suffered 39 double-digit declines since 1950, which amounts to a double-digit correction once every 1.85 years on average, each of the previous 38 downturns, not including this one, has been erased by a bull market rally.
These stocks look like screaming bargains
Many creative and time-tested firms stand out as tremendous steals now that the market has cratered, with several of them waiting to be purchased. The following are two such businesses.
Wells Fargo is a money-center bank that’s currently yielding 1.32%, resulting in it being primed and ready to be purchased by opportunistic investors at a striking discount.
The stock has dropped over a quarter of its value in the previous 3 months. Because bank stocks are cyclical, there’s worry that historically high inflation will force the United States into recession. It’s worth noting that first-quarter GDP in the United States did retrace by 1.4 percent.
The cyclical nature of banks, on the other hand, is precisely what makes them so appealing during market panics and economic downturns. Even though recessions are bound to occur, they generally last no more than a few months to a couple of quarters. Economic booms, on the other hand, usually last for years. Bank stocks are well-positioned to benefit from this natural growth in the United States economy.
The Fed’s monetary policy shift should benefit Wells Fargo as well. Although higher interest numbers usually slow the American economy, they imply that Wells Fargo can receive a greater net interest income on its variable loans. Next year’s earnings are expected to increase by 24% as a result of this net interest income increase.
Investors may buy Wells Fargo now for less than nine times forward-year earnings, above its book value.
Marijuana stock Trulieve Cannabis (TCNNF -3.85%) is another screaming bargain that investors may buy with confidence as the market tumbles. Since reaching an all-time high 14 months ago, shares have dropped almost three-quarters of their value.
Pardon my overused phrase, but after the Democrats took control of Congress, expectations for marijuana stocks were high. Following Pres. Joe Biden’s victory in Nov. 2020, it was anticipated that cannabis would be legalized nationally or at the absolute worst that cannabis banking regulations would be developed. However, no amendments have been passed to date, leaving Wall Street to punish what are called multi-state operators (MSO) such as Trulieve Cannabis.
However, going after U.S. marijuana stocks makes little sense since three-quarters of all U.S. states have legalized cannabis in some manner, including 18 states that have legalized adult-use consumption. As long as the federal government permits individual states to control their own industries, MSOs will continue to see organic growth potential.
Trulieve Cannabis stands out among MSOs in part because of how it’s grown. While most MSOs opened cultivation facilities and dispensaries in as many legalized states as possible, Trulieve’s attention until recently was almost entirely on Florida. Medical marijuana is legal in the state of Florida, and Trulieve has a monopoly on flower and cannabinoid oil sales.