With fears of a recession climbing as inflation gets higher, the stock market is on a downward correction. This is especially true for US growth stocks, many of which have been slashed in half.
However, on closer inspection, plenty of these businesses are only suffering what seems to be short-term disruptions. And with a stock market rally eventually on its way, there are plenty of bargain shares I’d buy in 2022.
The best beneficiaries of a stock market rally?
Consumer spending has already begun to slow, courtesy of rising living costs. That doesn’t exactly create the most favourable operating environment for e-commerce stocks. So I’m hardly surprised to see shares of Shopify and ETSY fall off a cliff as investor confidence seemingly evaporates.
Both stocks are down 75% and 55% respectively over the last 12 months despite seemingly making solid progress in improving the functionality of their respective platforms. Shopify recently launched its Audiences solution to help businesses find high-intent buyers on advertising platforms. Meanwhile, ETSY is ramping up its investments in marketing to drive more sales for its users.
But there are still some reasons to be cautious. Shopify is facing increased pressure from Amazon on the logistics front, while ETSY is currently dealing with some user backlash after raising its platform fees from 5% to 6.5%.
Yet, as economic conditions eventually normalise, consumer spending is expected to return to full form. And with both firms in leading positions within the e-commerce space, I can’t help but feel that investors have oversold their positions. That’s why I think these two stocks could be some of the best shares to buy for my portfolio before the stock market rally begins.
More spending means more transactions
Cash continues to disappear from everyday life. With the pandemic perfectly demonstrating how this archaic payment method can quickly spread disease, the worldwide transition towards digital payment solutions has only accelerated. Yet, once again, fears of a recession have made even industry leaders tumble.
Shares of PayPal, Mastercard, and Visa are down 75%, 15% and 16% respectively. Why? There are undoubtedly many factors at play. However, the primary downward driver seems to be the drop in consumer spending.
Fewer people buying goods in-store or online means fewer transactions flowing through these payments networks. And all have already announced some forms of expected growth slowdown for 2022.
However, as I’ve already said, this is ultimately a short-term problem. We’ve been through periods of economic turbulence before, and a stock market rally has always eventually followed.
All three of these US stocks have plenty of liquidity on their balance sheets to weather the storm. And with a track record of generating substantial cash flows, I think these businesses can continue to deliver shareholder value over the long term.
That’s why I see today’s share prices as buying opportunities for my portfolio.
