Finding Under-Valued Companies in a Bear Market

December 24th, 2018 marked the worst Christmas Eve trading day on record. On that day, the S&P 500 officially entered into a bear market which is defined as a decline of 20%. Interest rate hikes, a trade war between the US and China, and turmoil over a government shutdown have all contributed to the negative sentiment impacting the market. The average bear market typically lasts for 13 months with a decline of 30.4% and it typically takes the market 22 months to recover.
With this in mind, it is wise for investors to keep watching the markets and start cherry-picking the companies built on a solid foundation that they can add to their portfolio. As far as myself, I have been piling together cash for the past several months and getting my Christmas list together for the companies I find under-valued with a good balance sheet. A few of those stocks are Apple, Microsoft, T Rowe Price, Ulta Beauty, Berkshire Hathaway, Facebook, Google, Expeditors International, Skyworks Solutions, and F5 Networks. I will be releasing a review of each stock soon but it is up to you to perform your own valuation of any company you are interested in. Apple and Microsoft are my favorites on the list for obvious reasons. A large market cap, a presence in cloud technology, and good balance sheets with cash-on-hand. Apple has recently been impacted by the trade war and has falling 33% in the past 3 months. Below is a plot from Nasdaq with the recent price history.

Apple is a $715 Billion market cap company as of December 24, 2018 with a dividend yield of 1.94% and a P/E ratio of 18.5. As of September 29, 2018, Apple has a revenue of $265 Billion and a gross profit of $101 Billion. After accounting for operating expenses and income tax, Apple has a net income of $59 Billion which is 23% higher than the previous year. Apple has a earnings per share of $11.91 in Year 2018 (29% higher than the previous year) with a debt-to-equity ratio of 0.71 (total liabilities/total assets). Apple faces an uncertain headwind with the trade war still ongoing, however, I believe this is a strong company poised for growth and this is the reason I will continue to add to my position in the future.
To purchase shares of Apple and other companies, I use the M1 Finance platform and I have written a review of their platform.


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