Looking for Bargains in the Bull Market? Here's How to Find Them.

One positive thing about the much-dreaded bear markets is that you can easily find bargains everywhere. Some of the world’s top companies may find their shares in the doldrums in these environments, and even though you might not be in the investing mood, it’s a fantastic time for you to get in on these great investment stories.

But, today, the bear market is over and has been for some time. The investment community officially declared a bull market earlier this year, when the S&P 500 reached a new all-time high, but this bull market actually has been in action since the index started recovering from its bear market low. That was in October 2022. And since that time, many stocks have soared, climbing in the double and triple digits.

So today, you may be wondering about how to find bargains in such an environment. Well, the good news is they exist, and they aren’t very difficult to uncover.

Image source: Getty Images.

Take a look at top performers

It’s important to remember that just because a stock has gained a lot doesn’t mean it’s no longer an interesting player to buy. The perfect example is technology giant Nvidia (NVDA 4.00%). The stock has soared more than 230% over the past year, and at first glance, that may make you wary about picking up the shares today. You might worry this share performance story has reached its final chapter.

But that may not be the case. Even after Nvidia’s gains, the stock still trades for only 32x forward earnings estimates, which is very reasonable considering long-term earnings prospects. The company is the leading seller of artificial intelligence (AI) chips and has reported triple-digit increases in earnings in recent times. This is likely to continue thanks to the company’s dominance in this high-growth area and Nvidia’s increasing investments in research and development (R&D) to stay ahead of rivals.

All of this means it’s a great idea to examine some of today’s best-performing stocks and consider their future prospects. Of course, some may have become too expensive, but others, such as Nvidia, still have plenty of room to run — and could be considered bargains right now.

Next, to find bargains in this bull market, check out stocks that haven’t yet benefited from the momentum. Two examples are e-commerce players Chewy (CHWY 2.21%) and Etsy (ETSY -2.62%). Each of these stocks has lost more than 40% over the past year in spite of promising long-term stories.

Chewy’s profitability

Chewy, a seller of pet supplies, reached profitability for the first time in the full year 2022 and has continued to grow revenue over the past year — even as shoppers watched their wallets. The company has built a loyal base of active customers, and these shoppers have increased their spending on the platform. The company is debt-free and has more than $900 million in cash to support its exciting expansion opportunities.

As for Etsy, weaker consumer spending on discretionary items has weighed on growth, but elements are in place for a bright long-term story. The company reported record annual revenue last year, active buyers reached a new high of 92 million, and Etsy is investing in initiatives to supercharge growth this year. The company also finished the year with $1.2 billion in cash, and showing confidence in its own business, repurchased shares.

Etsy and Chewy trade for 15x and 24x forward earnings estimates, respectively, making them amazing bargains at the moment.

Stocks that aren’t attracting attention

When looking for bargains in a bull market, you also may consider areas that might not get as much attention during such a market phase: “Safer” stocks, those that pay hefty dividends or those operating in areas with steady earnings like healthcare, are great examples.

These players may not soar as much as growth stocks during a bull market, but over time could add significantly to your returns. So now, when they might be overlooked by the crowd, is the perfect time for you to check them out, potentially pick them up for a bargain, and gain over the long term.

All of this means that, even though bear markets may be known for offering investors bargains, don’t underestimate the bull market. There still are plenty of opportunities to uncover deals, both off the beaten path and hiding in plain sight.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy, Etsy, and Nvidia. The Motley Fool has a disclosure policy.

Source link

About The Author

Scroll to Top