Equity markets took a significant plunge on Monday, Aug. 5. Of course, that’s no reason for long-term investors to panic. We are still technically in a bull market, and whether or not equities continue to dip, the drop might create opportunities to pick up shares of great stocks from the discount bin. Which corporations should investors consider investing in while they are down?
Here are two worthy candidates: Apple (NASDAQ: AAPL) and Visa (NYSE: V). Find out why these two companies will likely be long-term winners regardless of what the market does in the short run.
1. Apple
Apple’s shares were down by about 5% on Monday. Though that doesn’t sound like a lot, considering we are talking about a stock worth more than $3 trillion, that’s tens of billions of dollars. Apple’s performance has been somewhat volatile for much of the year. It did not perform well through the first five months due to several headwinds, including slow iPhone sales in China, disappointing financial results, an antitrust lawsuit, and its perceived failure to keep up with its tech peers in the artificial intelligence (AI) race.
However, the company’s shares have rebounded in the past couple of months, partly thanks to its AI-related announcements during its developers conference in early June. How will things evolve for the tech giant through the end of the year? No one knows for sure, and that’s not a question of particular interest to long-term investors. The company’s prospects, though, remain strong. That’s what matters most. First, Apple’s financial results have improved.
In its latest reporting period, the third quarter of its fiscal year 2024, ended on June 29, Apple’s revenue grew by 5% year over year to $85.8 billion. Its earnings per share (EPS) of $1.40 were up 11% compared to the year-ago period. Revenue from its high-margin services segment was up 14.1% year over year to $24.2 billion. Second, Apple showed that it isn’t out of the AI race. The company’s nifty new AI features — which it dubbed Apple Intelligence — will be available to iPhone users (starting with the 15 Pro) and several of its other devices.
Apple has never sought to be first to market. It has a knack for taking existing technologies and adding its own spin on them. This slow and steady strategy has served the company well. Third, Apple has more than 2.2 billion devices in its installed base, which provides significant long-term monetization opportunities. Apple benefits from strong competitive edges, including switching costs (it’s not easy to leave its ecosystem), one of the strongest brands in the world, and the network effect within its app store since the more app developers it has, the more attractive it is for customers, and vice versa.
In short, though Apple might not grow as fast as it did in the last decade, it remains an excellent tech stock to buy and hold.
2. Visa
Visa also fell along with the broader market on Aug. 5, but that aligns with the company’s performance throughout the year. Visa has failed to keep up with broader equities since 2024 kicked off; its shares are currently up by just 0.32% year to date. Visa performance was largely driven by lower-than-expected consumer activity, which led to weak financial results. However, this is nothing to panic about. Visa’s payment network helps facilitate credit card transactions.
It earns a fee every time a consumer swipes a card bearing its logo. When consumer spending decreases, the stock will suffer. Despite this headwind, there remains significant whitespace for Visa to grow, as odd as that might sound at first. The company’s business — and branded credit cards — might seem ubiquitous, but cash, check, and other forms of transactions it can eat up still account for a massive payment volume.
The company recently estimated a $20 trillion opportunity. How does that compare to its current ecosystem? During its fiscal 2023 (ended Sept. 30, 2023), the company’s payments volume of $12.3 trillion increased 6% year over year. So, if Visa can make solid headway and capture a large share of this $20 trillion opportunity, its financial results should continue to improve. And there are excellent reasons to think it can do exactly that. Visa has no notable competitors other than Mastercard.
This duopoly is unlikely to be toppled anytime soon. The two companies benefit from a network effect. The more merchants within Visa’s payment ecosystem, the more attractive it is to consumers. The reverse is also true. Yes, Visa will sometimes encounter issues like it has this year, and so will every company in existence. Considering the company’s long-term prospects, though, Visa’s performance this year represents an excellent opportunity to pick up its shares.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Mastercard, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
2 Stocks to Buy In a Stock Market Sell-Off was originally published by The Motley Fool
