As 2022 has unfolded, it’s become increasingly hard to ignore market noise and keep buying cheap shares. This is particularly the case for US stocks, which have plunged in value since the S&P 500 index hit its record high on 3 January.
Six big negatives for US stocks
Last week, the S&P 500 briefly entered a bear market (defined as a 20% fall from a previous peak). This followed seven weeks in a row of S&P 500 falls. This was the index’s longest losing streak since the dark days of 9/11 back in 2001. And when I see market commentary nowadays, it’s all doom and gloom.
For example, investors are worrying about these negative events and pessimistic trends:
- Geopolitical problems, including the ongoing Covid-19 pandemic and the Russia/Ukraine war.
- Supply-chain constraints feeding red-hot inflation and soaring consumer prices, especially for fuel and energy. Also, prices of commodities including metals and oil have risen steeply in 2022.
- Interest rates entering a hiking cycle in the US and UK.
- China’s growth slowing down due to strict lockdowns and a weakening property market.
- US new home sales tumbling — down nearly 17% in April — which might indicate the housing market is turning negative.
- Slumping prices of stocks, bonds and cryptocurrencies have wiped an estimated $12trn from US wealth this year.
B limey.When I look at this long list, I understand why global investors are selling US stocks and rushing to the safety of cash and government bonds. But then I remember the wise words of Warren Buffett. At the height of the 2007-09 global financial crisis, the Oracle of Omaha famously wrote in the New York Times: “Be fearful when others are greedy, and be greedy when others are fearful.”
I’d buy one of these four crashed shares today
This calendar year, my family portfolio has suffered its largest loss in my 35 years as an investor. But that’s because so much of our capital is invested in equities. Also, we’re sitting on the largest cash pile we’ve ever had. And I’m itching to invest this pot in quality companies with decent future prospects.
Here are four US stocks I don’t own that have crashed in value during the latest market meltdown:
| Fundamentals | Meta Platforms | Amazon | Target Corporation | Snap |
| Share price (p) | $182.08 | $2,125.86 | $155.33 | $14.06 |
| 12-month change | -44.5% | -34.8% | -31.1% | -76.2% |
| 52-week high (p) | $384.33 | $3,773.08 | $268.98 | $83.34 |
| 52-week low (p) | $169.00 | $2,025.20 | $145.51 | $12.55 |
| Market value (£bn) | $492.8bn | $1.08trn | $72.0bn | $23.0bn |
| Price/earnings ratio | 13.8 | 51.4 | 12.9 | – |
| Earnings yield | 7.3% | 1.9% | 7.8% | – |
| Dividend yield | – | – | 2.3% | – |
As a veteran value investor, I aim to buy shares with low price-to-earnings ratios (P/Es), high earnings yields and above-market dividend yields. Looking at these four beaten-down US stocks, two shares stand out. Meta Platforms, parent of Facebook, was once worth close to $1trn and has since more than halved in value from this peak.
However, Meta doesn’t pay dividends, so I much prefer giant supermarket chain Target Corporation. Its shares plunged by a whopping 29.4% last week, following a profit warning. But this US stock now trades on a P/E under 13 and offers a dividend yield of 2.3% a year. This is a decent cash yield, given that most US stocks pay no or low dividends. So I’d buy Target today, despite widespread fear!