This has been a history-making year in more ways than one. The unprecedented coronavirus pandemic initially clobbered equities and sent them into a first-quarter tailspin. The 34% the benchmark S&P 500 lost in under five weeks represents the quickest bear market decline of at least 30% in history.
Following this historic plunge, investors saw the S&P 500 recoup everything that was initially lost (and then some) in a roughly five-month rally. This marked the quickest recovery on record from a bear market bottom to fresh highs.
Now history appears to be repeating itself. You see, over the past eight bear markets dating back to 1960, there have been a grand total of 13 corrections ranging between 10% and 19.9% within three years. This is to say that bear market bounces don’t simply go straight up. Every bounce inevitably leads to one or two sizable corrections.
What’s particularly interesting about the current correction is that it’s being led by technology stocks. High-growth tech stocks paced the rally from the March 23 low, but now the tech wreck is pushing the broader market lower.
However, downside in equities isn’t necessarily bad. While market corrections might hurt your personal bragging rights with your friends and family for a couple of weeks or months, they’ve always historically represented opportunities to buy into high-quality companies at bargain prices. Bull market rallies have always put corrections into the rearview mirror.
If the current tech wreck continues, the following four stocks will become very intriguing additions to investors’ portfolios.
One of the largest publicly traded companies on the planet, Amazon (NASDAQ:AMZN), should find its way into investors’ shopping carts if it keeps declining.
Most folks are likely familiar with Amazon for its seller ecosystem, which, according to analysts at Bank of America/Merrill Lynch, is responsible for an estimated 44% of all online sales in the U.S. There’s no question that retail will be responsible for the lion’s share of Amazon’s sales for the foreseeable future.
But Amazon is far more than just an online retailer with razor-thin margins. Amazon also operates a leading infrastructure cloud service, Amazon Web Services (AWS). We were already seeing a growing number of businesses shift to an online/cloud presence well before the coronavirus disease 2019 (COVID-19) pandemic struck. COViD-19 has simply been a shot in the arm for AWS’ growth.
As of the June-ended quarter, AWS grew year-on-year sales by 29%. It was pacing over $43 billion in extrapolated full-year sales. Cloud service margins are much juicier than retail or ad-based margins, so this strong double-digit growth in AWS will push Amazon’s operating cash flow through the roof over the next three or four years. If Wall Street simply values Amazon at the midpoint of its price-to-cash-flow multiple over the past decade, it should be a $6,000 stock by the end of 2023.