I think it is a good idea to buy some undervalued long-term stocks on weakness before they start to make a recovery. The current market environment is quite unforgiving for many stocks as investors have piled into just a few tech stocks. However, as the market cycle reaches an inflection point after the rate cuts, I believe many of these long-term stocks will deliver huge gains.
Moreover, many of these stocks have very little downside risk as they have seen significant selloffs. This makes it very appealing compared to the long-term upside many of these businesses have. Profitable companies with an established brand are highly unlikely to disappoint you in the long run if you hold them through the storm.
Thus, here are seven long-term stocks that are trading at bargain levels:
CVS Health (CVS)
CVS Health (NYSE:CVS) operates one of the nation’s largest health services companies. The stock has tumbled over 44% from its peak as the company faces significant headwinds. CVS posted disappointing Q1 results, with EPS of $1.31, missing estimates by 38 cents, largely due to surging Medicare Advantage costs that management failed to anticipate.
However, I believe the steep selloff provides an attractive long-term buying opportunity. CVS should benefit as interest rates decline, reducing the burden of its $82 billion debt load. Management is also taking decisive action to rein in Medicare expenses. You shouldn’t scoff at the rate-cut tailwinds, since interest expenses ate up nearly a third of operating income.
Furthermore, the healthcare sector enjoys powerful demographic tailwinds from an aging population. As one of the largest and most diversified healthcare companies, CVS is well-positioned to capture this rising demand over the long run. You can sit on its 4.4% dividend yield as it recovers.
Dollar General (DG)
Dollar General (NYSE:DG) operates a chain of discount retail stores across the United States. I am confident that Dollar General is one of the best retail stocks you can buy for the long haul, especially given the recent pullback in the share price. While net sales grew a healthy 6.1% YOY to $9.9 billion, the stock has been weighed down by near-term headwinds. However, I believe these are temporary speed bumps for a company that has a long track record of steady growth and profitability.
Looking ahead, Dollar General is poised to benefit from some powerful tailwinds. Value remains the top priority for shoppers across multiple income ranges in this inflationary environment. Dollar General is perfectly positioned to gain wallet share as consumers tighten their belts. I expect the stock to creep up as EPS recovers.
The company’s popularity with cost-conscious shoppers, coupled with its 1.84% dividend yield, makes it a compelling pick for bargain-hunting investors willing to ride out the near-term volatility. While the road ahead may be bumpy, I am convinced that this profitable retail stalwart will stage a solid recovery in the coming years as earnings rebound.
Estee Lauder (EL)
Estee Lauder (NYSE:EL) is a global leader in prestige beauty. Despite facing headwinds from the inflationary environment and reduced consumer spending on discretionary items, I believe Estée Lauder is poised for a solid long-term recovery once the market cycle turns a corner.
In Q3 2024, Estee Lauder delivered organic sales growth of 6%, exceeding expectations for profitability and significantly improving working capital. The company is confident that the second half of fiscal 2024 will prove to be an inflection point for sales and profit growth.
As a consumer discretionary company, Estee Lauder is undoubtedly cyclical. However, with the stock down nearly 69% from 2021 prices and top-line growth remaining in positive territory, I think now presents an attractive opportunity to buy shares at the trough. Estee Lauder’s profit recovery plan will deliver $1.1-$1.4 billion of incremental operating profit in fiscal 2025 and 2026. I think this positions the company well to accelerate sustainable growth.
DoubleVerify (DV)
DoubleVerify (NYSE:DV) is a software platform for digital media measurement and analytics. Even though the stock has plunged nearly 48% year-to-date on the heels of lowered guidance, I believe the market has overreacted. In Q1, DoubleVerify still managed to grow revenue by 15% YOY to $141 million, surpassing analyst estimates.
While net income did decline, management is still projecting full-year revenue growth of 17% at the midpoint of their revised $663-$675 million range. This is much lower than analyst estimates, but I think that this has been more than priced in by the stock’s correction.
Despite the near-term turbulence, DoubleVerify seems well-positioned to capitalize on the inexorable shift of ad dollars into digital video formats like social media and CTV. With social video ad spending expected to surge 20% this year and 81% of DoubleVerify’s Q1 social measurement volumes coming from video, the company’s AI-powered solutions are primed to excel. In my opinion, the recent valuation haircut seems far too harsh for DV.
Prologis (PLD)
Prologis (NYSE:PLD) is a real estate investment trust that invests in logistics facilities. While real estate companies have faced intense headwinds recently, I believe Prologis remains a bargain long-term stock to buy hand-over-fist.
Customers are focused on controlling costs, and net absorption was below average in Q1, but management expects limited new supply in late 2024 and into 2025. Prologis delivered strong 68% net effective rent growth based on commencements, and their in-place leases have a substantial 50% mark-to-market, representing over $2.2 billion of additional rent potential. Occupancy also remains high at 97%, and same property revenue has been surging.
Moreover, I’m not too worried about a real estate crash, as logistics real estate demand should keep growing due to onshoring trends. Real estate prices have also been relatively muted compared to other assets. With a solid 3.5% dividend yield, I think the recent dip provides an attractive entry point for this high-quality REIT.
Alibaba (BABA)
Alibaba (NYSE:BABA) operates China’s largest e-commerce platforms and cloud computing business. While the stock has disappointed many in the post-pandemic era amid a sluggish Chinese market, I believe Alibaba could deliver huge upside from here. The Taobao and Tmall Group achieved double-digit GMV growth this quarter, and Alibaba International Digital Commerce revenue surged 45%.
Most promising is the cloud segment, where revenue increased double-digits and AI-related sales skyrocketed triple-digits year-over-year. As China loosens monetary policy and Alibaba slashes cloud prices, Chinese firms are likely to pile into homegrown cloud leaders over Western providers. As such, I think Alibaba’s growth is poised to reaccelerate.
It’s a long-term bet but one with immense potential if these tailwinds play out. The stock may have a cloudy reputation currently, but blue skies could be on the horizon. I’m cautiously optimistic this e-commerce and cloud giant is turning the corner.
Lululemon (LULU)
Lululemon Athletica (NASDAQ:LULU) designs and sells apparel and accessories for active lifestyles. The current consumer discretionary downturn has undoubtedly weighed on Lululemon’s stock. LULU stock has declined nearly 39% year-to-date. However, I believe this makes it one of the best long-term stocks to buy right now.
The company delivered revenue growth of 10% (11% in constant currency), driven by continued strong momentum in international markets like China (+52%) and the broader “rest of world” segment (+30%). And while North America saw a more modest 4% growth, I’m encouraged that Canada still achieved a solid 12% gain. Same store sales have also been over double digits over the past few years. It has naturally slowed down after the 2021-2022 boom, but it remains solid. On the other hand, sales per store has been creeping up steadily.
Looking ahead, I expect Lululemon’s addressable market to fuel a reacceleration in growth as discretionary pressures eventually ease. With analysts projecting 10-11% annual top-line gains and 10-15% EPS growth going forward, I believe the recent selloff offers a compelling entry point for long-term investors.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
