Do you have $5,000 that you’re looking to invest in the stock market today? Below are some solid businesses you can invest in and which have promising long-term prospects but whose shares haven’t been doing all that well this year.
Shares of Apple (AAPL), PDD Holdings (PDD), and UnitedHealth Group (UNH) are all in negative territory, and here’s why that has created some great buying opportunities for investors.
Apple
Cash-rich tech giant Apple has a wonderful business. It’s Warren Buffett’s top investment and for good reason — it has a strong brand and fantastic financials behind it. Consumer demand for its products has remained relatively resilient even though economic conditions aren’t ideal for a business that sells high-priced products.
Last quarter, Apple’s product revenue was flat at around $96.5 billion for the last three months of 2023. But it’s the company’s other segment, services, which is what should make investors bullish on the business. Service revenue totaled $23.1 billion and rose 11% year over year. Once Apple has consumers into its ecosystem, it can be hard (i.e., costly) for them to leave.
As the business grows its service business, such as potentially launching a chatbot in the future, it has the potential to expand on these opportunities. That means even if its products may not be generating strong growth in the future, they may not need to given the potential for the service segment to pick up the slack.
Shares of Apple are down 9% this year, but with the stock trading at a more modest 28 times earnings, now may be a prime time to invest in the business. Its strong 26% profit margins and phenomenal brand make Apple a stock worth adding to your portfolio whenever it’s on sale. It can be a great place in which to invest $5,000 today.
PDD Holdings
The worst-performing stock on this list is PDD Holdings — it’s down 21% year to date. The China-based company comes with inherent risks, such as the worry that the Chinese government may add regulations which restrict its growth prospects at home and abroad. That risk is one of the reasons many Chinese stocks aren’t the hot buys they might otherwise be.
But if you’re comfortable with that risk, then PDD could make for a potential bargain buy in the long run. It trades at just 20 times earnings, and that multiple falls to 13 when looking at its future profits and what analysts expect from the business in the year ahead. In the longer run, it looks even cheaper, with a price-to-earnings growth, or PEG ratio, of just 0.6. Normally, a stock that is trading with a PEG of less than one is considered cheap; PDD is arguably a bargain.
The company behind the popular Temu online marketplace reported revenue of $34.9 billion last year, growing at a rate of 90%. Its operating profit rose at an even higher rate of 93%, coming in at $8.3 billion. Temu’s continued success and popularity make PDD Holdings a great growth stock to buy and hold.
UnitedHealth Group
Health insurance giant UnitedHealth Group has been facing some bad press of late. A data breach involving its subsidiary Change Healthcare is concerning enough that a federal agency will investigate into the hack. Unfortunately, data breaches aren’t uncommon these days. While they are concerning and can be problematic in the short term, they normally don’t weigh on a company’s long-term prospects.
This is an example of a good, modestly growing business that investors can buy and hold for years. In 2023, UnitedHealth reported revenue of $371.6 billion, which rose by 15% year over year. And its operating earnings of $32.4 billion increased by 14%.
What I like about UnitedHealth as a long-term buy is its dominance and importance in the health insurance industry. In the years ahead as the number of seniors in the U.S. increases, there will be even more demand for its products and services. It also pays investors a dividend that yields 1.7%, which is higher than the S&P 500 average of 1.4%.
Shares of UnitedHealth are down 15% this year. At a price-to-earnings (P/E) multiple of just 18, this modestly priced stock can make for an excellent investment to buy and forget about.
— David Jagielski
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Source: The Motley Fool