In today’s Exponential Investor

  • Bargain stocks
  • Industry for the future
  • Three down, three to go

One of the great things about investing for the long term is when the market decides to capitulate.

For me, when the market is in a state of utter, deep, unadulterated fear it’s the best time to be an investor.

It means that you can take your pick of oversold, on the nose, hated stocks with a long-term future and long-term potential to turn things around.

It means that when everyone is terrified of investing, you should be the happiest investor in the world.

I’m no advocate for trying to time the market. I’m a believer of time in the market, not timing the market.

But there are some points in time where you simply cannot ignore the fact that it’s a buyer’s market and that means you need to bust out the shopping list.

Right now, I believe, is one of those times.

We had a time like this in March 2020. We’ve got another chance today.

We might not have another chance like this for the rest of the decade. And even by then, if there is another of “these” moments, my view is the levels then will be substantially higher than today.

In other words, there is a good chance we may never see a whole range of quality stocks at prices like today, ever again.

What stocks?

When it comes to thinking about which stocks are the best ones on discount now, I think it’s important to understand the bigger social trends that will encapsulate the best opportunities.

In that sense I think we need to turn to a number of key ideas…

  • Artificial intelligence (AI)
  • Quantum computing
  • From combustion to electrification
  • Autonomous systems
  • Decentralised, permissionless finance
  • Remote/telemedicine.

Within each of those sectors are stocks that will form the foundations of tomorrow’s world. Some of the stocks within those sectors will be names that you know, that have been around for decades and are adapting to a changing world. Some are new names, names that are still unproven, untested and pioneers of our changing world.

Old and new

Mix the old with the new in the right way and I believe today you have a chance to form a bedrock of wealth for tomorrow’s world.

So within those sectors, what are some names to look at and run the ruler over?

Artificial intelligence: when you think of the name Hewlett Packard, you probably think of OK computers and pretty good printers. But my guess is you certainly don’t think of… AI.

But Hewlett Packard Enterprises (different from HP Inc, its computer and printer division) is focused on AI, big data and cloud technologies and software for global corporations.

This is a company that pays a dividend, trades at a measly price-to-earnings ratio (a widely used investment metric which tells you how many years of earnings would be paid for the current market value of the company) of 6.68-times and yet is a stalwart of the tech world. While the rest of the tech world has peeled away, it’s remained quite stable, but considering what the company does, the price that it trades at and the direction of AI, it merits further investigation.  

Quantum computing: this sector is harder to refine, it’s still incredibly early stage and theoretical in many cases. But one of the biggest drivers of quantum computing in the world is one company that continues to be written off by many in the tech world… IBM.

IBM helped to usher in the world we live in today. And when it comes to quantum computing, it may very well help us to usher in the world of tomorrow.

The company trades at a price-to-earnings ratio of 19.68-times. That’s still pretty high, but compared to a lot of the tech sector, is reasonably attractive considering what quantum computing could unlock for the world.

IBM too pays a dividend, as it makes a truck load of cash. While “Big Blue” – to use its long-standing nickname – might not be as sexy as Apple or as all-encompassing as Google, it is still deep in this quantum sector and may very well come out on top in the long run.

From combustion to electrification: the auto industry is rife with competition. A mix of the old and the new. A mix of companies stretching back hundreds of years, to some no more than a year or two from inception.

It’s full of hype, promise and potential. But if you’re thinking about companies that could form the future of this industry but aren’t at eye-watering multiples with zero revenues and massive losses, then the smart play is to look at the incumbents that are making change.

For me, it’s hard to look past one of the biggest (in terms of manufacturing numbers) in the industry, Volkswagen Group.

It is shifting entire manufacturing processes to an all-electric powertrain. It is releasing a new model after new model that is all-electric. Volkswagen’s core brands are changing their ideals to a cleaner and greener world.

This is quite something from the company at the heart of “dieselgate” cheating emissions tests to make its cars appear greener. But Volkswagen isn’t a giant conglomerate that will idly sit by and watch the challengers mount up and steal its business.

Volkswagen isn’t going anywhere and will continue to be at the heart of the global automotive market. And where the newcomers might steal the attention temporarily, Volkswagen is certainly one to consider.

Its net income is around $18 billion. Its price-to-earnings ratio is around 6.9-times. It is dividend paying. So… there’s a lot to like at this price considering the company’s importance to the auto world.

What about DeFi, self-driving cars and doctors on the web?

Of course, those are just three examples in three big long-term trends that worth looking at deeper.

We haven’t even yet touched on perhaps the biggest trend of them all – decentralised finance (DeFi), which is fast taking the world by storm.

The companies in this sector may prove to be the most valuable and important one for the next decade.

In fact, I’ve got a briefing that I’ve just released, that will only be online until midnight tonight that explains in detail why I believe how one of these companies at the heart of the decentralised finance world could be about to launch a secret partnership with the world’s most valuable company… Apple.

I suggest you access my intel on this immediately to take full advantage.

And in Wednesday’s Exponential Investor we’ll look at this DeFi trend and the other two mentioned above, autonomous systems and remote/telehealth, with more examples of the kinds of companies investors might want to consider for the long run.

Until then…

Sam Volkering
Editor, Exponential Investor