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There is a great deal of uncertainty about the upcoming year or so. Because it’s impossible to forecast when this bear market will conclude, it might be challenging to identify the stocks that will do well throughout that time span. But when you consider a longer time frame, such as five years or more, there are some fair assumptions you can make about which firms are likely to perform well.

Align Technology (ALGN -2.82%) and Visa (V -1.11%) are two stocks that have lost more than 15% of their value this year but have the potential to recover. These stocks seem to be no-brainer buys at the moment.

1. Align Technology

Clear aligners are produced by Align Technology, a manufacturer of medical equipment, under the well-known Invisalign name. Its braces are an easy substitute for traditional braces, which can be noticeable and cause a person to feel self-conscious about how they look. Although the cost of Invisalign might vary, it is often a little more expensive than traditional braces, sometimes costing several thousand dollars more.

On the other hand, there is a case to be made for the importance of dental care, particularly in a culture where teenagers and young people publish photos online via social media and dating applications. For individuals who believe they need braces, the cost could be justified because Invisalign is less obvious and more convenient to use than conventional braces. I’m optimistic about the company’s future because of this.

For the quarter that ended on June 30, the firm reported its most recent quarterly results. Net sales was $969.6 million, down 4.1% from the same quarter last year due to currency exchange rates and macroeconomic reasons in some regions (such as COVID-19 lockdowns in China). However, despite the challenges it is experiencing, Align still generated a net income of $157 million, or 16% of revenue.

Shares of Align Technology have fallen a staggering 67% so far this year. That is much worse than the 23% decline in the S&P 500. A price correction was probably needed because the company was selling at an excessively high price-to-earnings (P/E) ratio of more than 60 at the beginning of the year. But now that it is selling at 27 times its earnings and may have stronger financials in the future, it is a far more sound investment.

The P/E multiple for the typical healthcare stock is just around 20. Although Align is a little more costly than the average, the firm’s excellent profit margins and potential for long-term development indicate that it is deserving of a premium, and its financial performance should increase in the years to come as things return to normal in the the rest of the world.

Long-term predictions from Grand View Research researchers predict that the market for clear aligners will expand through 2030 at an annual compounded rate of 29.5%. Align is a no-brainer buy given its lower valuation and the potential for the company to develop over time, especially with a top brand like Invisalign to capitalize on those growth prospects.

2. Visa

The economy is another sure bet for long-term investors. Investing in Visa, one of the world’s leading issuers of credit cards, is a terrific opportunity to capitalize on this potential.

The stock is an obvious purchase since, despite the fact that an economic slowdown can damage the company’s sales, it is not a trend that will persist in the long run. The industry didn’t see a significant slowdown even in the early stages of the pandemic; during the fiscal year that concluded on September 30, 2020, revenue decreased by just 4.9% to $21.8 billion from the prior year. Sales increased to $24.1 billion the next year, 2021, more than making up for the shortfall.

The fantastic margins of this stock are another reason to enjoy it over the long term. A typical profit margin for Visa is around 50% of revenue (or better). Additionally, the business earned $16.1 billion in free cash flow during the previous 12 months.

Since Visa stock is down 17% in 2022, it technically outperforms the market this year. Compared to rival Mastercard, which is selling at 29 times its trailing profits, it is a little better bargain with a P/E of 27. If you’re ready to acquire and hold stocks, Visa is unquestionably a no-brainer investment because it is valued more modestly than its competition and there is a high possibility that the economy will recover in the long run.

Author: Steven Sinclaire

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