Attention all you Powerball hopefuls shelling out $100 or more for your long shot at riches in Wednesday's record-breaking lottery jackpot. You could drop your hard-earned dough on Powerball tickets with a loss almost 99.9999 percent guaranteed -- or you could buy a share of three beaten-down stocks with very much less downside than most large-cap stocks, and will likely deliver greater chances of making money.
The obvious thrill of Powerball is in gambling for that $1.5 billion prize, but a more reassuring, rewarding and long-term alternative could be in certain blue-chip stocks that are now on the bargain counter.
Here are three shares that are now opportunistic buys, with strong fundamentals -- steady growth in earnings, sales and profit margins -- that have been hammered down in the market's recent downturn way below their highs: Facebook (FB), the world's largest social media company; Starbucks (SBUX), the world's leading retailer of high-quality coffee products; and Amgen (AMGN), one of the world's leading biotech companies.
They've been high fliers prior to the market's 2016 swoon and now provide a rare chance of buying them at big discount prices. Essentially, they're ideal for investors with long-term financial goals. Apart from providing valuable services and important products, these three have been big money makers for long-term investors.
Here's how superbly Facebook has performed: Its stock rocketed from a low of $17.55 a share in 2012 to a high of $110.65 in late 2015, yes, $110.65. True, it has come down to $97 during the market's recent breakdown, but that's an opportunity for opportunistic investors who believe this company will continue growing and offering innovative ways to connect people.
Starbucks is another star performer, tripling from a low of $21 a share in 2012 to a 52-week high of $64 in late November 2015. Amgen is also in that category, soaring from a low of $63 in 2012 to a nearly triple-jump high of $181.81 in spring 2015.
Joseph Ju, analyst at Credit Suisse, provides three major reasons to remain positive on Facebook:
- It will be able to drive long-term revenue growth without a market lift in ad loads, with near-term drivers, including Instagram, premium video and dynamic product ads.
- The consensus underestimates the long-term modernization potential of Facebook's upcoming new products.
- There could be "upward bias to estimates, which do not contemplate contributions from multiple other products, including WhatsApp, Messenger and offers/local.
So, the analyst is maintaining his "outperform" rating on Facebook, with a price target of $135. (Credit Suisse has no investment banking ties with Facebook.)
Scott Kessler, analyst at S&P Capital IQ who rates Facebook a "buy," said he sees newer monetization opportunities over the near term related to Instagram and videos. His 12-month price target is $130 a share.
Starbucks is "one of the most compelling growth stories in the global consumer space today," said R.J. Hottovy, analyst at Morningstar. He noted that the company is positioned for top-line growth and margin expansion through menu innovations, sustainable cost advantages and an ongoing evolution into a diversified retail and consumer packaged-goods platform.
On Tuesday, Starbucks Chairman and CEO Howard Schultz announced expansion plans in China, which is a potentially giant market for the Starbucks brand. He expects to open 500 stores in China this year, where Starbucks' popularity is on the rise. "Brand, channel and technology investments," said Morningstar's Hottovy, give "Starbucks one of the widest consumer-sector moats" that protect it from any serious competition.
Amgen was recently upgraded to "overweight" at Morgan Stanley, which sees the stock outperforming in 2016, with two products in the pipeline as the key stimulants. So, Matthew Harrison, analyst at Morgan Stanley, has raised his price target to $193 a share from $160. (Morgan Stanley owns Amgen shares and has had investment banking business with the company.)
Just something to think about while you wait on long lines to buy your sure-to-lose Powerball tickets.