7 stocks I bought during this week’s market correction
The sharp sell-off in the stock market has continued for much of the past week. All three major equity indices have officially entered correction territory, down 10% from their most recent peak. This sale reduced the value of my portfolio.
However, one of the benefits of market corrections is that they provide the opportunity to buy stocks at more attractive prices. That’s exactly what I did this week, buying more shares of seven companies: Airbnb (NASDAQ: ABNB), Roku (NASDAQ: ROKU), SpotifyTechnologies (NYSE: SPOT), Cousin properties (NYSE: CUZ), SL Green Realty (NYSE: SLG), REP properties (NYSE: EPR)and Lennar (NYSE: LEN.B). Here’s why I think these stocks will be winners in the long run.
Disruptive technology on sale
Tech stocks have taken a beating in recent months. The sector had been booming since the market started to rebound from the initial pandemic shock in 2020, with the idea that this would accelerate technology adoption. However, this rally came to an abrupt end as interest rate and inflation fears gripped the market.
Shares of some of the biggest consumer-facing disruptive tech brands have taken a beating, with Airbnb, Spotify and Roku down 25% to 60% from their highs. Although they may still fall, I think they have huge long-term upside potential, which is worth it.
Airbnb estimates the short-term rental market alone is $1.8 trillion opportunity. Add in long-term rentals and the sale of experiences, and that’s a total opportunity approaching $3.4 trillion. That leaves plenty of growth for the vacation rental platform, which saw $11.9 billion in gross booking value in the third quarter.
Roku also has huge growth yet to come. More than half of U.S. households still get their televisions via cable and satellite, suggesting there’s a lot of cord-cutting to do. Add to that the streaming platform’s potential for international expansion and its opportunities to continue to monetize its content distribution and advertising platforms, and Roku has plenty of wiggle room.
Spotify is in this same category. Although it is the industry leader in audio streaming, it still has a lot of growth potential. More than half of its 381 million current monthly active users use its ad-supported offering, which generates 85% less revenue than its premium subscribers. Add to that the huge global market opportunity for audio streaming, especially as it grows in podcasts, and Spotify is only scratching the surface of its potential.
Deepen the profession of real estate valuation
Tech stocks aren’t the only ones to have tumbled in recent weeks. Many real estate shares also fell, weighed down by the ongoing pandemic, rising interest rates and supply chain issues.
Some of the hardest hit have been real estate investment trusts (REITs), especially those still struggling with pandemic-related headwinds like Office REITs and those who own consumer-facing properties like experiential real estate. Although the recovery has not been as smooth as hoped, market conditions are improving. That’s why I’ve taken advantage of the recent drop to buy more stocks in several REITs that I think will benefit as we learn to live with the virus.
Manhattan’s largest office landlord, SL Green, has fallen 20% from its peak – putting it 31% below its pre-pandemic level – even as companies firm up their return to the office plan. The Office REIT noted that leasing activity accelerated in the fourth quarter as New York City continued to recover. Meanwhile, Sun Belt-focused Cousins properties are down 10% from their recent peak – sending them down more than 10% since the start of the pandemic – even though demand for offices in the South has benefited from the pandemic as more and more businesses move and grow in business-friendly states.
EPR Properties, which focuses on owning movie theaters and other attractions, also fell more than 20% from its recent peak, putting it 40% below its pre-pandemic level. This decline even comes as the box office is making a comeback and people are enjoying more out-of-home experiences. The steady improvement in demand has helped boost the REIT’s rental collection rate, allowing it to restore its monthly dividend. It also has an improved balance sheet to buy additional experiential real estate to benefit more from the recovery.
Finally, I bought some more top-tier stocks Mason Lennar, which is down nearly 20% from its recent peak. As the homebuilder faces headwinds from higher interest rates, labor shortages and supply chain issues, demand for homes remains strong. Economists estimate that between 4 and 7 million units are missing from the housing market because the industry has cut back on construction since the financial crisis. This suggests that Lennar still has a lot of growth to come.
Focus on the long term vision
The past few months have been tough for investors, with stocks seemingly on an endless downward spiral. However, instead of focusing on these short-term headwinds, I remain focused on the long-term picture. This allows me to take advantage of the liquidation to buy shares of several companies with a better future at a lower price. Although I’m probably not buying at the bottom, I think most of these investments will pay off in the long run.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.