Investors should be encouraged by the Nasdaq Composite’s greatest January performance in more than 20 years, which occurred last month. The technology-heavy index saw its greatest return in January since 2001, rising 10.7% in January.
It came as a bit of a surprise as many market observers had forecast that there may be another correction in 2023 as a result of predictions that an economic slowdown and perhaps a recession are conceivable given the sharp increase in interest rates.
Here are three equities to think about purchasing if the market has another slump or bear market.
1. Apple (AAPL 1.92%) had a poor year in 2022, with a year-over-year stock price decline of 26%. It did, however, beat the Nasdaq Composite, which dropped by around 33% in 2022. A portion of the issue was simply a general sell-off in tech companies, as many of them had grown too expensive following a big run-up in 2020 and 2021.
Given the strength of 2021, this year’s quarterly figures were insignificant. Sales have decreased as a result of customers dealing with increasingly challenging economic circumstances brought on by rising interest rates, inflation, and a greater cost of living. The iPhone has had supply chain problems as a result of COVID regulations in China, where the majority of the phone’s components are produced.
The good news is that Apple’s value dropped significantly by the end of 2022, reaching a price-to-earnings ratio of about 20, which is the lowest level since the pandemic’s beginning. It has increased back to about 25, but even at that level, it remains a terrific value after a strong January.
But despite a challenging year, Apple managed to boost its market share for the iPhone to over 50% and see growth in its services sector, which includes devices with a subscription model like Apple TV+. If the market does crash once again, you will have the chance to purchase one of the top businesses in the world for much more of a discount than you can right now.
2. In the first two quarters of last year, the economy contracted or withdrew; this is regarded as a recession by some. The fact that we were in a bear market in 2022—defined as a market decline of 20% or more—is undisputed.
However, despite the financial crisis and stock market crash, Dollar General managed to perform admirably, ending the year up 4.4%. Since its IPO in 2009, Dollar General has not experienced a year-end loss and has consistently achieved a profit.
Dollar General has a history of outperforming its counterparts during weak markets thanks to its deep discount prices and strategy of targeting neglected areas, such as rural places or metropolitan settings, making it essentially recession-proof.
The stock has lost nearly 7% year to far, demonstrating once more how it typically moves against market trends. Dollar General, on the other hand, would be a strong bet to soar upward into the headwinds of a downturn if the economy slips into recession and the market declines.
3. Federated Hermes (FHI 0.43%) may not be a company you are familiar with, but it is one you should be aware of, especially given the current market conditions.
Given that downturn markets aren’t traditionally advantageous to money managers, Federated Hermes is an asset management company, which may immediately raise some concerns.
Federated had $447 billion in money market fund assets as of December 31, 2022, which was 71% of its $669 billion in total assets. Only 12% of its total assets, or $81 billion, were made up of equity funds, while the remaining 13%, or $87 billion, were made up of fixed income assets.
This is a terrific market for money market funds since interest rates are at their highest point since the Great Recession, and higher rates mean better payouts for investors.
In 2022, Federated’s assets reached a new high of roughly $669 billion, while the company’s revenue increased by 11% from the previous year.
Federated Hermes is well positioned to outperform, even if the market crashes once more, as interest rates are expected to climb further and remain high for the foreseeable future.