The 2022 year-to-date returns on most portfolios are dismal, and many economists expect things to get worse before they get better – but the good news is that they will get better. Economic cycles have reliable ups and downs, and historically, the market has always recovered its losses and gone on to reach new all-time highs. It’s simply a matter of when.
Selling off holdings in an effort to avoid further losses is acting on fear – and as the legendary Warren Buffett has said many times, “Be fearful when others are greedy, and be greedy only when others are fearful.” That means don’t give in to the temptation to liquidate assets – and do explore stocks that have the potential to deliver above-average returns when the market recovers.
These are three stocks to consider for the next three years and beyond.
Will Group 1 Automotive Stock Go Up?
It’s not an easy time to be in the auto business. Supply chain issues and chip shortages have made new vehicles hard to come by, and repairs take months instead of weeks due to national parts backlogs.
Group 1 Automotive stock has dipped a little bit year-to-date – around five percent – but all in all, the company has managed to weather the current storm with relative ease.
Group 1 Automotive (NASDAQ:GPI) is a Fortune 300 company based in Houston, Texas. It operates 147 car dealerships in the United States, as well as 55 dealerships in the United Kingdom.
All of the dealerships are involved in selling new and used cars and trucks, and they handle financing, service and insurance contracts, and maintenance and repair services.
In addition to the brick-and-mortar dealerships, Group 1 Automotive has a thriving digital sales platform called AcceleRide®. The digital channel allows consumers to research, select, and finance vehicles almost entirely online, giving Group 1 an edge over less tech-savvy auto retailers.
Group 1 Automotive announced its first-quarter 2022 results on April 27th, and the biggest news was the company’s total revenue. For the first quarter, total revenue reached $3.8 billion, an all-time record and a 30.1 percent increase year-over-year.
Other highlights from the first-quarter financial results include:
Net Income – $201.1 million (an increase of 99.3 percent year-over-year)
Adjusted Net Income – $184.6 million (an increase of 81.6 year-over-year)
Diluted Earnings per Common Share – $11.78 (an increase of 115.3 percent year-over-year and another all-time record)
Adjusted Diluted Earnings per Common Share – $10.81 (an increase of 96.2 percent year-over-year)
Despite the current challenges, Group 1 Automotive continues to demonstrate above-average performance. Group 1 Automotive stock is expected to recover and will likely reach new highs over the next three years. That makes Group 1 Automotive stock a buy.
Is ONEW Stock A Buy?
There’s a certain kind of freedom that comes with boating. The hustle and bustle of daily life fades away, and there’s nothing to do but take in the view – perhaps adding in a bit of fishing, swimming, and snacking along the way. Georgia-based OneWater Marine makes that dream a reality through nearly one million boat sales yearly.
OneWater Marine currently owns 95 dealerships, and it’s growing fast. The company is actively seeking independent dealerships that are interested in being acquired, and it is expanding into the parts and service space to ensure a diverse revenue stream.
In addition, OneWater Marine has a popular digital tool that allows customers to shop for boats online. That’s a must in an increasingly digital world.
It’s true that OneWater Marine stock is down more than 40 percent year-to-date, but the business and market analysts believe that is temporary.
OneWater Marine isn’t struggling for lack of demand. In fact, it’s just the opposite. The company can’t keep up with high demand due to supply chain challenges that have created widespread delays for boat manufacturers and repair shops.
OneWater Marine announced its fiscal first-quarter results on February 3, 2022, for the period ended December 31, 2021. The company’s performance was better than expected, prompting leadership to raise fiscal full-year 2022 guidance.
Highlights from ONEW earnings report are as follows:
Revenue – $336 million (an increase of 57 year-over-year)
Same-Store Sales – 28 percent increase year-over-year
Gross Profit Margin – expanded 550 basis points to 30%
Net Income – $23 million (an increase of 99 percent year-over-year)
Net Income per Diluted Share – $1.45 (an increase of 105 percent year-over-year)
Adjusted EBITDA – $41 million (an increase of 146 percent year-over-year)
As of the first-quarter earnings call, OneWater Marine expects the following fiscal full-year 2022 results:
Adjusted EBITDA – $210 million to $220 million
Earnings per Diluted Share – $8.00 to $8.40
Based on these projections and the fact that OneWater Marine is executing on its growth strategy flawlessly, analysts have rated OneWater Marine stock a strong buy.
Has TimkenSteel Been Sold?
TimkenSteel doesn’t get much attention from investors and analysts, despite being the best steel stock in the industry from almost every perspective. The Ohio-based company has been in business since 1899.
Throughout its one-and-a-quarter century history, it has mastered the art and science of producing high-quality steel for a variety of uses. TimkenSteel is a key component for energy infrastructure, auto manufacturing, and various industrial applications.
Given its long history, some were shocked by the April 2021 news that Shanghai’s Daido Steel would acquire TimkenSteel. TimkenSteel’s leadership quickly clarified that TimkenSteel was not to be sold – the company was simply divesting its TimkenSteel Shanghai business through a sale to long-time Chinese partner Daido Steel. The rest of TimkenSteel remains a US company, as it has been since it was founded.
The steel industry is quite sensitive to world events, and events like the pandemic, trade wars, and the Russian invasion of Ukraine have an outsized impact on demand. In 2021, the global steel market grew by 2.7 percent, which is considered relatively robust when the pandemic is considered.
The war in Ukraine has muted demand for steel considerably, and industry organizations are predicting growth as low as 0.4 percent for 2022. However, the outlook for 2023 is markedly better. Growth is projected at around 2.2 percent. Higher demand means higher revenue for TimkenSteel, which is why the few analysts who have studied the company rate TimkenSteel stock a buy.
3 Stocks To Buy Now: The Bottom Line
When the market plunges, it’s not time to sell – it’s time to scoop up strong companies at discounted prices. Group 1 Automotive, OneWater Marine, and TimkenSteel offer in-demand products, they have solid financials, and they are fully prepared to maneuver through the current economic cycle. All three of these stocks are a smart buy for investors with an eye on medium to long-term returns.
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