Stock markets fell significantly on Monday, August 5. Of course, that’s no reason for long-term investors to panic. We’re still technically in a bull market, and whether stocks continue to fall or not, the decline can create opportunities to pull shares of great stocks out of the discount bin. So which companies should investors consider investing in as they fall?
Here are two worthy candidates: Apple (NASDAQ: AAPL) And Visa (NYSE: V)Find out why these two companies are likely to be long-term winners, regardless of what the market does in the short term.
1. Apple
Shares of Apple fell about 5% on Monday. While that may not sound like much considering we’re talking about a stock worth more than $3 trillion, that’s tens of billions of dollars. Apple’s performance has been mixed for most of the year. The company has struggled in the first five months of the year due to a variety of headwinds, including sluggish iPhone sales in China, disappointing financial results, an antitrust lawsuit and a perceived inability to keep pace with its tech peers in the race for artificial intelligence (AI).
The company’s stock has rallied in recent months, however, thanks in part to announcements about AI at its developer conference in early June. How will the tech giant fare through the end of the year? No one knows for sure, and that’s not a question of particular interest to long-term investors. But the company’s outlook remains strong. That’s the bottom line. For starters, Apple’s financial results have improved.
In its latest reporting period, the third quarter of its fiscal year 2024, which ended June 29, Apple’s revenue grew 5% year over year to $85.8 billion. Earnings per share (EPS) of $1.40 were up 11% from the year-ago period. Revenue from its high-margin services segment rose 14.1% year over year to $24.2 billion. Second, Apple showed that it’s not out of the AI race yet. The company’s nifty new AI features, which it calls Apple Intelligence, will be rolling out to iPhone users (starting with the 15 Pro) and several other devices.
Apple has never tried to be first to market. The company has a knack for taking existing technologies and putting its own spin on them. This slow and steady strategy has served the company well. Third, Apple has over 2.2 billion devices in its installed base, which presents significant long-term monetization opportunities. Apple enjoys strong competitive advantages, 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, where the more app developers it has, the more attractive it is to customers, and vice versa.
In short, while Apple may not be growing as fast as it has over the past decade, it remains an excellent tech stock to buy and hold.
2. Visa
Visa also fell along with the broader market on August 5, but that’s in line with the company’s performance throughout the year. Visa has failed to keep pace with broader stocks since the start of 2024, with the shares currently up just 0.32% year to date. Visa’s performance was largely driven by lower-than-expected consumer activity, leading to weak financial results. That’s no reason to panic, though. Visa’s payments network helps make credit card transactions easier.
It earns a fee every time a consumer swipes a card with its logo. When consumer spending falls, its stock price suffers. Despite these headwinds, there’s still significant room for growth for Visa, as strange as that may sound at first. The company’s business—and branded credit cards—may seem ubiquitous, but cash, checks and other forms of transactions it can eat up still account for a huge volume of payments.
The company recently estimated a $20 trillion opportunity. How does that compare to the current ecosystem? During fiscal 2023 (which ended September 30, 2023), the company’s $12.3 trillion in payment volume grew 6% year-over-year. So if Visa can make solid progress and capture a large portion of this $20 trillion opportunity, its financials should continue to improve. And there are excellent reasons to think it can do just that. Visa has no significant competitors, except MasterCard.
This duopoly is unlikely to be toppled anytime soon. The two companies benefit from a network effect. The more merchants in Visa’s payments ecosystem, the more attractive it is to consumers. The reverse is also true. Yes, Visa will sometimes encounter problems like it has this year, and that’s true for any company in existence. But given the company’s long-term prospects, Visa’s performance this year presents an excellent opportunity to buy 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 Jan 2025 $370 calls on Mastercard and short Jan 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
2 Stocks to Buy During a Stock Market Sell-Off was originally published by The Motley Fool
