Oversold Stocks to Buy and Hold for Long-Term Returns
Stocks are bouncing today after a miserable start to the week. Despite all the doom and gloom talk, there are a few oversold stocks to buy this year with the potential for explosive long-term returns.
With the Federal Reserve raising interest rates to tame the overheated economy, the stock market is giving back much of its returns since the pandemic. The fallout comes as economic growth slows, inflation continues picking up, and the war in Ukraine pressures commodity prices.
The rollercoaster ride expects to continue, with analysts now predicting less economic growth than previously forecast. With this in mind, higher inflation lessens consumers’ ability to buy.
Furthermore, corporate giants like Amazon (Nasdaq: AMZN) and Google (Nasdaq: GOOGL), seeing profits slow, could spell trouble ahead. If you wish to capture long-term returns, keep reading to discover the top oversold stocks to buy in 2022.
Top Oversold Stocks to Buy in 2022
We are seeing a different market today than what we have experienced in the past few years. Then again, financial markets are constantly changing. Investors process new information as it becomes available and then make decisions based on expectations.
Currently, the expectations are incredibly low. The Conference Board Consumer Confident Index inched down again in April after a slight boost in March.
As a result, many stock market leaders are losing significant value as assets continue selling off. Below is a snapshot of how brutal the selloff is in 2022.
- S&P 500 Index (SPX): 16%
- Nasdaq 100 Index (NDX): 25%
- Dow Jones Industrial Average (DJI): 12%
As you can see, the market is not leaving much room for growth this year. But there are still a few opportunities to make money. For example, oil stocks lead the market, with the Energy Select SPDR Fund (NYSE: XLE) up 42% YTD.
As the market rotates, new leaders emerge, presenting trading opportunities. Yet rarely does the chance to buy long-term leaders at discount prices happen.
With the market down significantly from its highs, investor emotion is high. The CNN Fear & Greed Index shows extreme fear. It may be an opportunity to buy leaders for long-term returns.
I’m searching for industry leaders with growing earnings and strong fundamentals to find long-term growth opportunities. Below are a few of the top oversold stocks to buy in 2022.
No. 4 Disney (NYSE: DIS)
- YTD Return: -32%
- EPS Growth YOY: 231%
- Revenue Growth YOY: 23%
After the pandemic seemingly decimated Disney’s business, the house of mouse showed how resilient the company is. Moreover, Disney is transforming into a digital media powerhouse with over 205 million subscribers across its streaming portfolio.
Yet Disney’s theme parks continue to see a solid recovery in the U.S. That said, per capita spending rose over 40% compared to 2019 as the brand favorite zeroes in on the customer experience.
At the same time, the company is pouring money into park renovations as it gears up for its 100th anniversary. New attractions like Guardians of the Galaxy: Cosmic Rewind should continue attracting new visitors. Finally, Disney’s substantial catalog of top-tier brands and characters will continue carrying the company between licensing and new content.
No. 3 Target (NYSE: TGT)
- YTD Return: -3%
- EPS Growth YOY: 19%
- Revenue Growth YOY: 13%
Although Target is only down 5% in 2022, TGT stock is down over 20% from its ATH, near $278 in November. With this in mind, Target has a rich history of rewarding shareholders, with 219 consecutive dividends paid (since the company became public) since 1967.
At the same time, the supermarket favorite is rapidly growing its revenue streams while focusing on future growth. For example, Target Plus is the company’s expanding 3rd party marketplace.
Target’s superior growth strategy is paying off while the company maintains a strong balance sheet. With new revenue streams and the ability to capture shoppers with the latest fashion trends, Target should continue maintaining its momentum.
Finally, if you think Target stock is hardly oversold, you may be right. But consumer discretionary is one of the worst-performing sectors this year. With this in mind, Target is holding its own as investors look to lessen risk.
Keep reading to find the top oversold stocks to buy this year.
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What Are the Best Oversold Stocks to Buy Right Now?
With the market in freefall right now, buying stocks can be like trying to catch a falling knife. So far, the U.S stock market is off to its worst start since 1939.
The growth outlook is bleak, inflation is high, and the war in Ukraine has no end in sight. Yet the stock market has also been notoriously resilient for over a decade. Will it be different this time? Do we have further to fall?
The S&P 500 is down about 17% from its ATH, around $4818. That said, there have been times the index has fallen much further.
For example, in 2008 the Global Financial Crisis, the SPX fell by over 38%. And from 2000 to 2002, the SPX lost 46.55% of its value. So, this is not to say the market will not fall further. Rather, with a long-term investing strategy, these oversold stocks to buy are more likely than not to continue their dominant growth.
