Stock price often does not reflect the actual performance of a company. Sometimes bad companies see their share price climb for dumb reasons (like people touting the stock of social media for reasons that have nothing to do with its actual business). In other cases, share prices fall for macroeconomic or speculative reasons that also don't actually tie to the brand's results.
As a long-term, buy-and-hold investor (someone who intends to hold the stock at least three years, but likely longer) these market disconnects create buying opportunities. Essentially, you want to find companies that are performing well or are set up to perform well, where the share price has been lagging.
The past year created a number of incredible value purchases where good companies have seen their share price fall in 2022, but it's hard to imagine that staying the trend over the next few years.
(All shares prices are from market close on Christmas Eve).
Starbucks
1. Starbucks
In tough economic times, Starbucks (SBUX) may see some customers cut back, but others will see a fancy coffee drink as an affordable luxury. Shares in the coffee chains are trading nearly 16% down year-over-year, but that price reflects labor issues, executive turmoil, and general concern over the economy, not the demand for the chain's products.
Starbucks leads its category and has a well-defined business model. After years spent focusing on execution, the chain has a major plan to make its process more efficient while also cutting costs, and continuing to innovate.
2. Target
Target (TGT) shares have lost nearly 40% of their value in 2022. That drop happened because the chain saw its margins fall and got caught with excess high-priced inventory it had to sell off at a discount (something that likely gave it a stronger bond with its customers).
Yes, Target's margins dipped but sales and foot traffic increased. There has been a battle for retail customers and "Tar-Jay," as some of its fans jokingly refer to the chain has clearly won that battle.
3. Walt Disney
In a year when a Walt Disney (DIS) resort vacation became even more expensive (and profitable for the company) and Disney+ became the number two streaming service, the company's stock has struggled. Disney's share price dipped about 43% over the past year due to concerns over its movie business, questions about now-former CEO Bob Chapek, and political battles with Florida Governor Ron DeSantis.
Investors were also worried about losses in the streaming business, but those losses were in line with what the company had told investors to expect. And, yes, the movie business may never come back, but Disney has better intellectual property than any three, and maybe all of its rivals put together.
Consumers will pay for Marvel, Star Wars, Pixar, and Disney content. It may take the company a while to figure out the best platforms, but ultimately, the company with the best content will dominate and that's Disney by a large margin.
4. Microsoft
Microsoft (MSFT) might be the most surprising name on this list. The company does face some regulatory concerns over its acquisition of Activision Blizzard (ATVI) but it's not like the software/cloud giant's fortunes rest on that. It's also possible that broad economic concerns have weighed on the company, but businesses won't be dropping the Office suite because of tough economic times.
The reality is that Microsoft sells/licenses products that are deeply rooted into companies' ecosystems. Cutting back or getting rid of them is basically impossible in the short-term which makes Microsoft essentially recession proof.
