Now is a great time to buy stocks. The market has been super-negative over the last couple of months. The war in Ukraine and rising interest rates are two of the primary culprits, along with our COVID-19 malaise. This has made stocks a lot cheaper, and you can find some amazing bargains.
Shopify (NYSE: SHOP) is a steal right now, at 60% off its highs from November. Sea Limited (NYSE: SE) has had a similar drop, down about 60% in the same time frame. That’s the first thing I’d do: Buy shares of these two internet stalwarts. Even if they get cheaper in the near term, they will absolutely crush the market over the rest of the decade.
But I also have some ideas that are specific to 2022 and the bear market we are in. So in my hypothetical portfolio, I would also open positions in For Biotechnology (NASDAQ: VIR) spirit W&T Offshore (NYSE: WTI). Here’s why I like these four stocks.
Internet commerce is a no-brainer
I’ve been investing in the stock market for 25 years, and the retail transition to internet commerce has been one of the most obvious (and most profitable) stock ideas in my investing lifetime. My family has made a lot of money investing in e-commerce stocks, including Carvana (NYSE: CVNA), Farfetch (NYSE: FTCH)and (of course) Amazon (NASDAQ: AMZN).
Right now, I think the strongest opportunities are in Shopify and Sea. Both of these companies are amazing, and the stock prices have been truly whacked. If you do not own them yet, now’s the perfect opportunity to jump in.
Shopify is a software-as-a-service (SaaS) company that powers all the mom-and-pop retailers that want to engage in online commerce. Several years ago, Amazon tried to compete against Shopify and quit. I was kind of blown away by that. It made me run out and buy up the stock. And it’s been an incredibly happy ride.
As for Sea, it’s an e-commerce giant on the other side of the world. Based in Singapore, it has a dominant franchise in the gaming industry with its mobile hit Free Fire. Unlike the American gaming companies that have largely focused on PlayStation and the Xbox, Sea has focused on the mobile market.
And from there the company has expanded into e-commerce with its Shopee website, as well as internet payments with its Sea Money division. It’s another internet stock that has just killed the market since its debut in 2017.
While 60% drops are brutal, I’ve seen worse. Did you know that Amazon stock once crashed 93%? It’s hard to believe that one of the finest stocks over the last 25 years could be hit that hard. But that’s what happened. If you bought Amazon at the end of 1999 – with that Prince song running on the radio – you would be down 93% in less than two years.
So these 60% drops in Shopify and Sea aren’t scary to me. In fact, it’s kind of mouth-watering. I would buy four shares of Shopify at $ 677, for a cost of $ 2,708, and 17 shares of Sea at $ 137, for a cost of $ 2,329.
For Bio’s numbers are insane
How would you like to own a stock with 48% profit margins and revenue growth of 46,000%? Of course, it’s super-expensive. No, wait, it’s one of the cheapest stocks you can find. Right now Vir is trading at 1.3 times forward earnings.
So how does that happen? Well, Vir is a biotech company. And when you go from having zero drugs on the market, to having the Food and Drug Administration give you an Emergency Use Authorization for your COVID treatment, your numbers are going to spike higher. Vir’s drug, Xevudy, has sent the biotech’s numbers into the stratosphere, with $ 1 billion in revenue and $ 500 million in net profits.
Vir’s partner, GlaxoSmithKline (NYSE: GSK), has quickly sold 1.7 million doses of the drug, with each dose priced at $ 2,000. That makes it a $ 3.4 billion molecule right now. Since Vir is responsible for the science, the small biotech collects a cool 72.5% of all Xevudy revenue. For is a tiny company, with a $ 3.2 billion market cap. And the biotech has all sorts of fascinating drugs in its pipeline, including a potential cure (!) For hepatitis B. I’d buy 100 shares of Vir, costing me $ 2,783.
And the top sector in the stock market right now: oil
The stock market hates oil stocks. It’s a dirty business. It’s a commodity business. We all know the future is going to be the electric car. Just about everybody has thrown in the towel on oil.
And that has made these stocks incredibly cheap. I do not own any oil stocks. But if I were starting over from scratch and I wanted to beat the market this year, I would probably make a small investment in oil.
Why? The sector is killing it in 2022. W&T Offshore is up 43% in two months. And it’s still cheap as dirt.
The stock trades at four times its forward earnings. In its most recent quarter, the company had 84% revenue growth from a year ago. That was before the war in Ukraine, or the price of oil spiking to almost $ 100 a barrel.
W&T Offshore is a founder-led company that’s been drilling in the Gulf of Mexico for almost four decades now. Management owns over 30% of the stock.
So far, 2022 has been bizarre world, with Shopify dropping 50% and oil companies running up 40%. W&T is my favorite oil stock because it’s small, the stock is cheap, and the company has been paying off its debts. I do not know if we’re going to see 1970’s stagflation, but if we do, I’d want to own at least one oil stock. And this is it. So as a defensive measure, I’d buy 470 shares of W&T Offshore at $ 4.60 a share, costing me $ 2,162. (And with the rest of my cash, I’d buy a few gallons of gas.)
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Taylor Carmichael owns Amazon, Carvana Co., Farfetch Limited, Sea Limited, Shopify, and Vir Biotechnology Inc. The Motley Fool owns and recommends Amazon, Farfetch Limited, Sea Limited, and Shopify. The Motley Fool recommends GlaxoSmithKline and recommends the following options: long January 2023 $ 1,140 calls on Shopify and short January 2023 $ 1,160 calls on Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.