Following one of the greatest single bull runs ever seen by the market, the S&P 500 Index is now down over 4% since the beginning of 2022.
Tech shares are taking a hammering, rate hikes are causing a mass rotation out of growth stocks, and blue-chip companies are trading like penny stocks at times with huge sudden drops becoming more and more common.
Instead of focusing on the day-to-day fluctuations of the market, however, we’ve always believed in buying and holding high-quality companies long-term. This lengthy horizon allows us to zoom out a little from the micro-movements occurring every day and instead examine the true underlying value of a company.
In light of this, here are two companies that I believe hold long-term underlying value to investors trying their best to deal with the downturn.
It should come as no surprise to see Apple (NASDAQ: AAPL) appear on a list like this. Apple is one of the few companies that have the capacity to ride out this period of uncertainty and emerge on the other side in an even better position.
In its recent earnings call, Apple announced record quarterly revenue despite having to navigate a myriad of supply chain issues and consumer uncertainty. The company has also offered positive guidance for the upcoming quarter with record sales expected once again.
Apple has massively diversified its revenue streams in recent years, no longer relying on its hardware offerings to bring in the bulk of its cash. Its services unit, which accounts for the App Store and other digital media purchases, grew by 19% last quarter with the company announcing that it currently has over 785 million paid subscriptions offering consistent recurring revenue.
Possessing the world’s most valuable brand, a suite of highly sought after and market-leading products, and a culture of innovation; Apple is extremely well-positioned to continue its dominance for years to come.
Starbucks (NASDAQ: SBUX) has become entrenched in our minds as the go-to name in caffeine and retains a dominant market position. This dominance gives the company clear advantages in terms of scale compared to its competitors.
The company continues to expand its footprint globally, now operating roughly 34,000 stores according to its latest earnings report. The company has grown by an average of 14.5% each year for the past five years and has returned over 28,400% since its IPO in 1992.
The company has made massive in-roads into lucrative markets such as China, where it now has over 5,000 stores in over 200 cities. Despite these stores dealing with COVID-related headwinds recently, Starbucks is in as good a position as any other company to dominate yet another market following smart distribution partnerships with two of the largest food delivery firms in China: Meituan and Alibaba.
Current short-term issues are unlikely to affect Starbucks stock too much in the long term. Continued expansion and growth are likely to propel the coffee chain to further heights over the next decade, with it unlikely that a true challenger to its throne will rise from the ether.
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.