What will it take for a new bull market to begin? The commonly accepted definition of a bull market is when stock prices rise 20% or more above their previous low. The S&P 500 is up nearly 13% from its bottom reached last October. All it needs to do is gain another 7% or so to meet the required threshold for the bulls to run again.
A new bull market realistically could be on the way in February. Here are three stocks to buy now that could be winners.
Alphabet‘s (GOOG 1.96%) (GOOGL 1.96%) shares were hit hard in 2022. Investors worried about the weakening digital advertising market. Some were concerned about potential new competition from OpenAI’s ChatGPT chatbot.
But Alphabet is beating the S&P 500 so far this year. There’s a good chance that it will also rebound more than most tech stocks in 2023, especially if a new bull market begins.
Nearly any company would love to be in Alphabet’s financial position. Thanks to dominating businesses including Google Search and YouTube, Alphabet will likely report revenue for full-year 2022 in the ballpark of $280 billion, with profits of close to $28 billion. The company sits atop a cash stockpile of $116 billion.
Some expect the Federal Reserve to stop raising interest rates as early as March. If this happens, it could provide just the spark needed for companies to crank their ad spending back up. That would help Alphabet.
The New York Times also recently reported that the Google search engine could include chatbot capabilities later this year. This would potentially relieve investors’ concerns that Google might be beaten by ChatGPT.
Amazon (AMZN 2.57%) had a rough year in 2022 as well. Its shares plunged nearly 50% amid concerns about the company’s slowing growth. However, the stock is off to a great start in 2023, with a nice gain of close to 20%. Even better days could be ahead.
Sky-high inflation was among the biggest problems impacting Amazon’s growth. The good news is that inflation appears to be cooling off somewhat. This improvement is behind the aforementioned predictions that the Fed will soon ease up on interest rate hikes.
Amazon has also taken steps to reduce costs. The company announced two rounds of layoffs, with the total number of staff impacted rising from 10,000 to 18,000. These measures will boost the company’s profitability.
Value investor Bill Miller projects that Amazon will generate free cash flow (FCF) of $60 billion by 2025. That translates into a price-to-FCF multiple of around 17. Miller told CNBC earlier this year that the stock should rebound strongly with this attractive valuation. He added that Amazon is “one of the easiest names in the market right now.”
3. Vertex Pharmaceuticals
Unlike Alphabet and Amazon, Vertex Pharmaceuticals (VRTX 0.97%) made its shareholders happy last year. The biotech stock soared 31% in 2022. That momentum has continued into this year, with Vertex’s shares jumping more than 10%.
Vertex is arguably a must-have stock to buy right now. Why? For one thing, it’s positioned to perform well regardless of what happens with the economy or the overall market. The company commands a monopoly in treating the underlying cause of cystic fibrosis (CF). Its CF drugs will enjoy strong demand whether or not the economy and stock market thrive.
In addition, Vertex could have some key catalysts on the way. It expects to complete the filing in the first quarter for U.S. regulatory approval of exa-cel as a functional cure for beta-thalassemia and sickle cell disease. Applications for approval in the European Union and U.K. have already been submitted. If approved, exa-cel will become the first CRISPR gene-editing therapy on the market. Vertex and its partner, CRISPR Therapeutics, think that exa-cel could generate peak annual sales of more than $2 billion.
Vertex also anticipates a potential near-term approval and launch of VX-548 in treating acute pain. The experimental non-opioid drug is currently being evaluated in a late-stage clinical study. The company thinks VX-548 has a multibillion-dollar market opportunity.
What if a bull market doesn’t begin?
We shouldn’t put the cart before the horse (or the bull, in this case). It’s possible that a new bull market won’t begin in February or anytime soon. Even if there isn’t a bull market on the horizon, though, Alphabet, Amazon, and Vertex should be solid picks for long-term investors to buy now.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon.com, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Alphabet, Amazon.com, CRISPR Therapeutics, New York Times, and Vertex Pharmaceuticals. The Motley Fool recommends the following options: short April 2023 $38 calls on New York Times. The Motley Fool has a disclosure policy.
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