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4 Beaten-Down Large-Cap Stocks with Long-Term Growth Potential

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All major indices, oil and even gold continue their downward trajectory. And looking around at the carnage, it is easy to lose your nerve. After all, we are not technically in a recession yet. And although all the signs are pointing that way, it is not a given at this point. Maybe, just maybe, we can manage a “soft landing.”

While some sectors look somewhat better off than others, by and large, it is the growth stocks and small caps that are taking it on the chin. Clearly, all bets are off risky assets.

Growth stocks tend to be smaller companies that are still proving their business model. They may not be making any money yet. They may be running entirely on borrowed capital that they may not be able to pay back.

Their success hinges on investor confidence, which is of course tied to a certain payback period. So, when there’s significant uncertainty in the market such as now, the payback period also becomes uncertain. For many, it doesn’t make sense to wait for things to settle down. So they jump out of these stocks.

This pushes prices further down making it difficult even for investors with a long-term horizon. Particularly because not every company will emerge from a recession or similar disruption unscathed. And chances are that a company already operating on the edge will go under. It just makes sense to get out.

But the past decade has shown us that even very big companies can be growth stocks. Because technology stocks delivering basic Internet-based services are able to use their platforms to collect so much data on the public that they are able to anticipate trends in user behavior and choices to keep pulling more and more revenue to themselves. So not all growth stocks can be painted with the same brush.

However, traditional growth stocks are not the subject matter of this article. Nor are the new age tech “growth” stocks. The problem we are faced with today is better answered with stocks that have long-term growth potential.  

Better yet, these are stocks that have generated decent growth in the past and are expected to generate decent growth in the future as well. The focus is on large caps because these companies have been around longer and been through other bear markets. So they are better equipped to take care of near-term upheavals.

The fact that they’ve already been losing value is also good because it means that their long-term potential is very likely not reflected in their prices. Dividend payments are an added bonus and support investors when cash is tight. And finally, of course, there’s Zacks methodology to make sure that the stock rank is conducive. So, let’s get started:

Apollo Global Management, Inc. APO is a Zacks #2 (Buy) ranked company that has generated 11.37% growth in the last five years. Analysts currently expect it to generate 18.75% growth in the long term. Apollo Global’s shares have lost 33.38% of their value year to date. Its dividend yields 3.32%.

Pool Corp. POOL shares the same rank as Apollo Global. The company has generated 36.52% growth in the last five years, helped by unusually strong pent-up demand driven by the reopening.

And now, despite the expected hit to consumer discretionary companies in this downturn, analysts estimate that Pool Corp’s long-term earnings growth will be 10%. Understandably, the shares are down 41.18% year to date. Pool Corp also pays a dividend that yields 1.20%.

QUALCOMM Inc. QCOM also has a Zacks #2 rank. The company has grown its earnings 19.0% over the last five years and is currently expected to grow at 16.28% in the long term. However, its shares have been battered in the current onslaught, losing 33.84% of their value year to date. Its dividend yields 2.48%.

Zacks #2 ranked Synchrony Financial SYF may have grown 17.59% in the last five years. But analysts expect it to grow even faster, at 23.01% in the long term. So the fact that its shares are down 35.57% year to date looks like a good opportunity to buy. Synchrony Financial also pays a dividend that yields 2.94%.

One-Month Price Performance

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Zacks Investment Research

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