It’s impossible to predict the next move in the stock market, but one thing we can be sure of is that a bull market is coming. How do we know? Because bear markets are always followed by periods of market optimism and peak performance.
And we are on the right track: The S&P 500 The price bottomed out in the bear market last year, but has since risen more than 20%.
Once the index hits a new high, investors can officially celebrate the arrival of the bull market. The best way to prepare for this highly anticipated moment is to purchase stocks of companies that are expected to benefit during strong market times.
Where to start? With two companies that have performed so well in recent years that they implemented stock splits in 2022. Companies often split their shares after the price jumps, lowering the value of each individual share and making it easier for a wider range of investors to get in on the action. Let’s take a closer look at the stock split stocks you should definitely buy ahead of the bull market.
alphabet (GOOG 0.73%) (GOOGL 0.83%), the parent company of Google, is by far the market leader in the Internet search market. It holds a whopping 91% of the global market and that is the reason why the company continues to be successful when it comes to selling advertising. Advertisers know that their potential customers use the Google search engine and can be reached directly there with an ad.
This is pretty important since ads are a major source of revenue for Alphabet. Google advertising alone accounted for 77% of revenue in the second quarter. In difficult economic times, advertisers’ budgets suffer, and that means companies like Alphabet could suffer too. Although Google’s advertising revenue has declined in recent quarters, it rose again in the second quarter. And Google’s total revenue has continued to rise.
What’s ahead? Alphabet’s investment in artificial intelligence (AI) could be the company’s next big growth driver – improving search and engaging advertisers. The tech giant recently started testing AI-powered Search Generative Experience to transform the search experience.
Investors could also benefit from another exciting Alphabet business, and that is Google Cloud. Growth here has increased rapidly, increasing by 28% in the quarter. The cloud accounts for a much smaller share of revenue than advertising, but this business is on the rise and has plenty of room for growth.
Although Alphabet shares have risen this year, the stock still trades at just 24 times forward earnings estimates. And that seems reasonable given the company’s market dominance and its desire to stay on top.
Amazon (AMZN 0.28%) is a leader in two markets with double-digit growth: e-commerce and cloud computing. This should help the company excel in an improving economy and strong stock market environment.
We’ve already seen early positive signs – from Amazon’s stock performance to the company’s latest earnings report. Amazon shares are up 64% year-to-date. And recent earnings reflect the company’s efforts to navigate today’s difficult times.
Higher inflation weighed heavily on Amazon, increasing the company’s costs and straining its customers’ budgets. Amazon suffered as a result and even reported its first annual loss in almost a decade last year.
But Amazon quickly moved to improve its cost structure, cut jobs and increase efficiency across its fulfillment network. In the US, for example, order fulfillment is now organized on a regional basis instead of shipping items across borders.
As a result, Amazon reported a net profit in the second quarter, compared to a net loss a year ago. Revenue increased by double digits and free cash flow improved to an inflow over the last 12 months, compared to an outflow in the year-ago period. And at Amazon Web Services (AWS) – the cloud computing company – there has been a shift from customers watching their budgets to customers starting new projects. This is important because AWS has generally increased profits at Amazon.
Amazon now trades at 2.6 times sales, compared to an average of about 4 in recent years. So even after gains this year, this stock split player still appears to be a bargain ahead of the next bull market.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adria Cimino holds positions at Amazon.com. The Motley Fool holds positions in and recommends Alphabet and Amazon.com. The Motley Fool has a disclosure policy.
Source : www.fool.com