Investors may call this a bear market. Investors may call this a market correction. Or, perhaps, investors can call it an opportunity.
Markets may be down, but that just gives investors a chance to pick up stocks of great companies with long-term potential on the cheap. Here are two to consider.
Eyes on the Prize
A little over a decade ago, General Engines (GM -0.09%) was an automaker that investors viewed as short-sighted and unfit to handle the problems posed by the financial crisis – and that was a fair criticism.
Fast forward to today, and this review is no longer accurate. General Motors has arguably done more than any other automaker to reshape its image and prove to investors that it has changed its management philosophy to become a more forward-looking juggernaut.
The Detroit automaker has a slew of electric vehicles (EVs) ready to hit the road in the truck, SUV and luxury segments that will cover around 70% of the EV industry volume. GM has a new digital retail platform strategy with its US-based dealerships to improve the consumer experience and, more importantly, reduce costs for GM by approximately $2,000 per vehicle.
GM is looking to the future with original ideas like BrightDrop, the automaker’s tech startup that focuses on eCarts and software — basically, an electric ecosystem of first-to-last-mile product delivery solutions. . That’s underpinned by its electric vehicle platforms, which are expected to generate $1 billion in revenue in 2023.
By focusing on retail strategy, reducing battery costs and improving manufacturing efficiency, GM expects to generate approximately $50 billion in electric vehicle revenue in 2025 and grow it. do with low to mid-single-digit EBIT profit margins.
The automotive industry is changing at a breakneck pace, and General Motors has finally embraced change and formulated a compelling plan to thrive for the next few years. The bear market gives savvy investors a chance to jump on board at a fair price and a price to earnings ratio of just 5.6.
Brand image matters
If investors are looking for a company to buy during a bear market, there may be no better option than a company that doesn’t care less about a market downturn.
For Ferrari (RACE -1.09%), a downturn in the market is just another day due to its brand image, exclusivity and target of affluent consumers. In fact, even in a downturn, the company’s strategy remains the same: sell only a limited number of vehicles and make big profits.
Ferrari keeps a cap on the number of vehicles it sells, and probably always will. And with demand still outstripping supply, this fosters an impressive scenario that is exploding margins against incumbent automakers.
If you’re looking for proof, just look to the company’s impressive third quarter which posted double-digit gains in revenue, EBITDA and EBIT, in the face of economic uncertainty, rising rates of interest and turbulent waters with industry chip shortages.
While Ferrari is a unique automaker for investors, even during bear markets, the company is not exempt from needing an eye on evolution and growth. Luckily for savvy investors, the company has recognized this and launched a strategy it’s long avoided: larger vehicles.
Ferrari will enter the SUV market with the Purosangue, which it does not call an SUV. The Purosangue will be available for purchase in 2023 and will give the company the ability to do something it has yet to do: charge an even higher price for a larger vehicle.
The finish line
The current bear market will not be the end of the auto industry. On the contrary, it gives investors the opportunity to acquire shares of excellent forward-thinking companies at a reduced price. There is no doubt that General Motors and Ferrari will excel in the years to come, and a bear market will hardly slow them down.
Daniel Miller holds positions at General Motors. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.