In this article, we discuss 10 stocks to buy now before the bull market begins. If you want to see more stocks in this selection, check out 5 Stocks to Buy Now Before the Bull Market Begins.
JPMorgan Asset Management’s chief global strategist, David Kelly, told Bloomberg on August 12 that stocks could recover and peak within the coming few years as the economy displays signs of a rebound. He believes that to be bullish on the stock market, investors should have at least a three year investment horizon. He views a stock market rebound as “eminently doable”. After reaching a record low in June, equities have had a prominent rally lately. The S&P 500 Index jumped to a three-month peak on August 10 in response to the better than anticipated July CPI data, which will likely result in the Federal Reserve cooling off its tightening interest rate regime that battered the stock market in 2022.
David Kelly stressed that it will take some time to push inflation back to 2%, but as long as the economy is moving in the right direction, a recession can be avoided. With inflation slowing down, the economy is still lagging but companies are able to sustain margins, which according to Kelly is a “pretty good outlook” for the stock market. In line with his belief that lower interest rates paired and a cooling economy will drive stock prices higher, Kelly told Bloomberg:
“I would be fully invested in equities at this point because I do think that equities can move higher here.”
According to market experts like David Kelly, the economy is on its way to a rebound. Before the bull market begins and prices as well as valuations shoot up, there are a lot of buying opportunities in the stock market. Some of the stocks to buy now before the bull market is upon us include Netflix, Inc. (NASDAQ:NFLX), PayPal Holdings, Inc. (NASDAQ:PYPL), and Uber Technologies, Inc. (NYSE:UBER).
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
We selected securities that have the potential to recover in the coming years, with inflation cooling down and consumer spending increasing. These stocks have been battered year to date, yet the companies offer strong fundamentals and new initiatives for the future. We have mentioned the hedge fund sentiment around the securities as of Q1 2022, which was gauged from Insider Monkey’s database of 900+ elite hedge funds.
Stocks to Buy Now Before the Bull Market Begins
10. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 19
Share Price Decline YTD as of August 16: 39.80%
Robinhood Markets, Inc. (NASDAQ:HOOD) is a California-based financial services company that offers a platform for stocks, exchange traded funds, options, gold, and cryptocurrencies. Robinhood Markets, Inc. (NASDAQ:HOOD) stock has declined about 40% year to date as of August 16. However, as the bull market begins, investors will start piling into the equity and crypto markets, which will drive traffic on Robinhood Markets, Inc. (NASDAQ:HOOD) and the stock will rebound. Robinhood Markets, Inc. (NASDAQ:HOOD) on August 3 announced that it is cutting its 2022 total operating expenses by about 29%, after moving to reduce its employees by 23%.
On August 12, Deutsche Bank analyst Brian Bedell raised the price target on Robinhood Markets, Inc. (NASDAQ:HOOD) to $10 from $9 and maintained a Hold rating on the shares. The analyst amended some macro assumptions in his models and revised EPS estimates and price targets among his Brokers, Asset Managers, and Exchanges coverage, observing “a mostly upward bias” on the back of the equity market recovery in Q3 so far and “relatively good” fundamentals seen in Q2 2022.
According to Insider Monkey’s data, 19 hedge funds were bullish on Robinhood Markets, Inc. (NASDAQ:HOOD) at the end of Q1 2022, compared to 24 funds in the earlier quarter. Cathie Wood’s ARK Investment Management is the largest shareholder of the company, with 30.35 million shares worth $410 million.
In addition to Netflix, Inc. (NASDAQ:NFLX), PayPal Holdings, Inc. (NASDAQ:PYPL), and Uber Technologies, Inc. (NYSE:UBER), smart investors are pouring into Robinhood Markets, Inc. (NASDAQ:HOOD) before the bull market begins.
Here is what Claret Asset Management has to say about Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2021 investor letter:
“Robinhood went public at $38 a share at the end of July of this year. After a one day decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that the company does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, it is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
9. SoFi Technologies, Inc. (NASDAQ:SOFI)
Number of Hedge Fund Holders: 22
Share Price Decline YTD as of August 16: 41.97%
SoFi Technologies, Inc. (NASDAQ:SOFI) is a California-based company that provides digital financial services. It operates through three segments – Lending, Technology Platform, and Financial Services. Consumer spending is steadily increasing, which means demand for SoFi Technologies, Inc. (NASDAQ:SOFI)’s lending services and digital banking will potentially increase and the stock is likely to recover. Currently, the shares are down about 42% year to date as of August 16.
On August 3, SoFi Technologies, Inc. (NASDAQ:SOFI) stock climbed 28% after the company posted better-than-anticipated Q2 revenue and adjusted EBITDA, while elevating its full-year guidance, supported by a macro backdrop where investors are less risk averse. Mizuho analyst Dan Dolev raised the price target on SoFi Technologies, Inc. (NASDAQ:SOFI) to $8 from $7 and reiterated a Buy rating on the shares on August 3. The company reported a “strong beat and raise” quarter, the analyst told investors.
According to Insider Monkey’s data, 22 hedge funds were bullish on SoFi Technologies, Inc. (NASDAQ:SOFI), compared to 24 funds in the prior quarter. Jim Davidson, Dave Roux, and Glenn Hutchins’ Silver Lake Partners is the leading position holder in the company, with 31.15 million shares worth $294.40 million.
Here is what Altron Capital Management had to say about SoFi Technologies, Inc. (NASDAQ:SOFI) in its Q4 2021 investor letter:
“We have been building our position in SoFi over the last two quarters but have not yet written about our thesis until now. SoFi is an online financial technology company that started off refinancing student loans. This segment remains a big part of the company’s business, but they have more recently expanded their products to offer an entire suite of financial services including personal banking, investing, and credit. While their collection of products is still evolving and not yet complete, we believe the company is in the early stages of its inflection. The company nearly doubled its member count over the past year and is growing 50%+ despite its loan refinancing business taking a hit due to the COVID-related loan moratorium. Furthermore, the company is close to obtaining a bank charter through its acquisition of Golden Pacific Bancorp, a community bank based in Sacramento. A bank charter would allow SoFi to take in its own customer deposits, lowering its cost of capital and expanding the company’s breadth of financial offerings.
While SoFi is not the only online banking platform out there, we believe it could take a decent share of the financial services market. Banking is a notoriously sticky business, as the inconvenience and hassle of switching banks prevent consumers from jumping to competitors regardless of cost. This is one of the reasons that traditional banks are one of the few businesses to have truly been disrupted by technology. We think SoFi is well on its way to changing that and creating a new paradigm for the future of consumer banking and financial services.
The factors that will ultimately drive consumer adoption of online banking are cost and convenience. In our opinion, SoFi is best positioned to drive consumers away from the legacy banking model. Their one-stop-shop approach for financial services and their lack of a brick-and-mortar branch network to maintain may eventually propel them into becoming one of the larger players in the banking industry in the United States…” (Click here to see the full text)
8. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 40
Share Price Decline YTD as of August 16: 52.23%
Roblox Corporation (NYSE:RBLX) is a California-based company that develops and operates an online entertainment platform. Roblox Corporation (NYSE:RBLX)’s paying customers are likely to increase with rising consumer spending in the US. More traffic on the platform will potentially act as a catalyst for the stock’s recovery, which is currently down more than 52% year to date.
Deutsche Bank analyst Benjamin Black on August 12 raised the price target on Roblox Corporation (NYSE:RBLX) to $52 from $45 and reaffirmed a Buy rating on the shares. The set-up heading into the second quarter for Roblox Corporation (NYSE:RBLX) was not easy as the shares had already gained significantly since since the end of May, but despite the eventual “muted” stock reaction, the underlying fundamentals and management’s commentary made him confident in the topline trajectory, the analyst told investors.
Among the hedge funds tracked by Insider Monkey, 40 funds were bullish on Roblox Corporation (NYSE:RBLX) at the conclusion of Q1 2022, compared to 61 funds in the earlier quarter. Cathie Wood’s ARK Investment Management is the biggest position holder in the company, with more than 6 million shares worth $281.7 million.
Tao Value, an investment management firm, discussed the performance of Roblox Corporation (NYSE:RBLX) in its Q4 2021 investor letter. Here’s what the fund said:
“Roblox (RBLX) got significant more attention from both institutional & retail investors after Facebook announced to rename itself as Meta Platforms. I believe the price appreciation is largely attributed to the increased attention. On the business side, Roblox rolled out a few successful music events and also partnered with Netflix on testing long-form media consumption in the virtual world. Apple in its iOS 14.5 rolled out an impactful change for the digital advertising landscape by requiring all apps to ask users to “opt in”.
7. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 44
Share Price Decline YTD as of August 16: 61.02%
Peloton Interactive, Inc. (NASDAQ:PTON) is a New York-based company that offers interactive fitness products. As consumer spending improves and if inflation is controlled, people can start investing in personal wellness and gym memberships will likely increase, which will help Peloton Interactive, Inc. (NASDAQ:PTON)’s shares to recover due to higher demand for its product line.
Citi analyst Ronald Josey reiterated a Buy rating on Peloton Interactive, Inc. (NASDAQ:PTON) on August 15 and said the $28 price target is based on a sum-of-the-parts analysis whereby he values Peloton Interactive, Inc. (NASDAQ:PTON)’s core subscription business at 4.5X the FY2023 revenue estimate and 1.0X the FY2023 CF product revenue estimate. The analyst believes that June’s all-access subscription price increase, the higher prices for Bike+ and Tread products, and the company’s decision to outsource manufacturing could result in prominent gross margin expansion in FY23.
According to Insider Monkey’s data, 44 hedge funds were bullish on Peloton Interactive, Inc. (NASDAQ:PTON) at the end of Q1 2022, compared to 60 funds in the preceding quarter. Philippe Laffont’s Coatue Management is a notable stakeholder of the company, with 8.6 million shares worth $227.5 million.
Here is what Merion Road Capital has to say about Peloton Interactive, Inc. (NASDAQ:PTON) in its Q1 2022 investor letter:
“Given what I have discussed so far you might be surprised that I built a new position in Peloton (“PTON”). PTON has had a rollercoaster ride in the public markets. Following their 2019 IPO at $29 the stock rocketed to over $160 at the peak of the covid hype, before tanking to its current price in the mid‐$20’s. The company has basically checked the box on any negative event you could think of. A few standouts include cutting guidance (May 2021, November 2021, January 2022), major strategic gaffes (overbuilding supply capacity, flip-flopping on price cuts), and poor/misleading communication (raising capital 2 weeks after stating there was no need to raise capital). So why would I own this?
Peloton (the product, not the stock) has a strong brand name, value proposition, and customer loyalty. Despite their woes the company has built an established base of users that should be highly valued. The market is currently telling us that their 2.7mm users are worth $2,600 per subscriber, or just 7.5x subscription gross profit. Simplistically this assumes 1/7.5x = 13% annual attrition which is more draconian than current levels of ~10% (of course giving no credit for future growth)…” (Click here to see the full text)
6. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 46
Share Price Decline YTD as of August 16: 64%
Coinbase Global, Inc. (NASDAQ:COIN) is an American company that offers a financial platform and technology infrastructure for the crypto universe. As the crypto economy gains momentum once again, Coinbase Global, Inc. (NASDAQ:COIN) stock could potentially recover, which is why it is a good idea to buy it now before the bull market begins. Coinbase Global, Inc. (NASDAQ:COIN) shares have plunged about 64% year to date as of August 16.
On August 11, DA Davidson analyst Christopher Brendler raised the price target on Coinbase Global, Inc. (NASDAQ:COIN) to $100 from $90 and reaffirmed a Buy rating on the shares. Coinbase Global, Inc. (NASDAQ:COIN)’s Q2 results were “broadly better” than his mid-July reset, with “positive variances” across several core drivers, the analyst told investors. Coinbase Global, Inc. (NASDAQ:COIN)’s short-term outlook remains cloudy, but the latest rally raised his confidence in an eventual recovery, the analyst contended, stating that he remains positive about a “Fed-driven crypto rally by year-end”.
Among the hedge funds tracked by Insider Monkey, 46 funds were long Coinbase Global, Inc. (NASDAQ:COIN) at the conclusion of March 2022, compared to 57 funds in the prior quarter. Jim Simons’ Renaissance Technologies is one of the leading shareholders of the company, with more than 1 million shares worth $199.7 million.
Like Netflix, Inc. (NASDAQ:NFLX), PayPal Holdings, Inc. (NASDAQ:PYPL), and Uber Technologies, Inc. (NYSE:UBER), Coinbase Global, Inc. (NASDAQ:COIN) presents a strong buying opportunity before the stock market makes a full recovery.
Here is what Rowan Street has to say about Coinbase Global, Inc. (NASDAQ:COIN) in its Q2 2022 investor letter:
“The mentality of a passionate Founder/CEO drives a completely different thought process and decision-making that makes all the difference. This is a quote by Brian Armstrong, Founder and CEO of Coinbase (NASDAQ:COIN):
‘I can speak with some authority and say we are not going to do that because this is not why I started the company – I don’t have to give any other justification. Rather than the professional CEO that comes in that is accountable to Wall Street and quarterly earnings may start thinking about the company differently. One of the most scarce things in companies today is risk tolerance. For example, take Tesla vs. Waymo. Tesla launched self-driving cars while Google didn’t. The reason is the founder-CEO (Elon Musk) said that I care enough about the mission that we are ready and we are gonna go for it. Whether a professional CEO is thinking about his/her career trajectory, the founder CEO doesn’t care about the next job and only cares about the mission.’”
Click to continue reading and see 5 Stocks to Buy Now Before the Bull Market Begins.
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Disclosure: None. “Pretty Good Outlook”: 10 Stocks to Buy Now Before the Bull Market Begins is originally published on Insider Monkey.