The Nasdaq is trying to break out to new monthly highs, while multiple U.S. indices are putting in a series of higher highs. It’s got investors thinking about the end of the bear market. Ultimately, it’s got investors looking at the best stocks for a bull market.
To some extent, investing is often about preparation. It’s helpful to devise multiple scenarios so we know how to react. In that event, we can be ready for multiple outcomes depending on how things pan out.
Case in point, we don’t know if the current bear market is ending now or when it will ultimately do so. Sure, the stock market has performed pretty darn well in the first quarter of 2023, but there are a lot of mixed signals in the market right now. And admittedly, a recession seems to be barreling toward us.
I am writing this article on the premise that these stocks are not necessarily ones to buy right here, right now. Rather, I’m looking for names that I want to buy on pullbacks or upon the realization that we are truly entering a new bull market. I understand that different investors have different definitions of when that turn will be official.
That said, I want to be prepared for when we enter a new bull market, because we will at some point. Let’s look at the best stocks for a bull market.
Walt Disney (DIS)
Disney (NYSE:DIS) sure seems to be trading like there’s a recession on the horizon. For long-term buyers stalking Disney stock for a position, this is good news. A 12% pullback from current levels would send Disney down to new 52-week lows. A trip down to about $80 (a decline of about 16.5%) would send shares back down to the 2020 Covid-19 low.
It’s possible that we see those prices or worse in the coming weeks or months. But let me tell you something: Once the economy bottoms and begins to rebound, and once the bull market is underway, Disney is going to be a name you’ll want to own for quite some time.
Not only does it have powerful travel, studio and experiences businesses, but it has grown its digital streaming business into a real powerhouse. Combined, it’s not crazy to assume that Disney will eventually regain its all-time high near $200.
Just for some perspective, from current levels, Disney stock would gain more than 100% if and when it takes out that high, which I believe it will do in the next bull market.
Tesla (NASDAQ:TSLA) stock has been trading much better so far this year. Within the first week of 2023, Tesla stock bottomed and it then more than doubled off the low. If we enter a deep recession, both in the U.S. and/or globally, that’s going to weigh on Tesla’s business.
After all, the company is an automaker and as consumer spending power comes under pressure so too will Tesla’s revenue. That said, once the economy fires back up, Tesla will be there to absorb that increase in consumer spending.
Not to mention, the company continues to generate very impressive top- and bottom-line growth at the moment, while also generating its own energy revenue.
I don’t know if Tesla stock will make new lows again or not. The selling pressure going into late-2022 was pretty intense and it has me thinking that, unless we go into a painful tailspin in the stock market and a deeper recession, we may not see the $100 level tested again.
That said, I do believe Tesla shares will make new highs.
The action in PayPal (NASDAQ:PYPL) is quite disappointing for bulls. Not only was the stock caught up in a massive selloff, suffering a peak-to-trough decline of 78.6%, but it’s not partaking in the tech-stock rally of 2023!
Shares are up just 10% from the 52-week low while many names in tech are up several multiples of that. Tesla more than doubled. So did Nvidia (NASDAQ:NVDA). While PayPal is in a different industry than these names, investors would have liked to see a stronger rebound.
However, the company has staying power. It’s now forecast to grow revenue and earnings this year and next year, while trading at a reasonable valuation. It now trades at roughly 15 times this year’s earnings forecast. That’s cheap.
When the market does eventually return to a bull market, I think money will flow back into PayPal. Even if PayPal only regained half of its losses, it would mark a 150% rally from current levels.
On the date of publication, Bret Kenwell held a long position in PYPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.