5 High-Conviction Stocks to Buy in the Next Market Correction

It’s helpful to prepare a watch list of stocks you plan to accumulate. Markets are experiencing heightened volatility in recent months as the Federal Reserve raises interest rates to tackle runaway inflation. With the NASDAQ Composite Index and S&P 500 Already in a bear market this year, stock prices may have room to fall further. You should view a market correction as a golden opportunity to accumulate more shares in companies you already own or to start a new position in a company that has become much cheaper.

Of course, you’ll need to make sure various attributes are in place before you pull the trigger. The company needs to demonstrate consistent growth, be a dominant player within their industry, and enjoy tailwinds that allow them to continue to do well. With these features in place, a buy-and-hold strategy can ensure you enjoy consistent compounding to meet your retirement goals.

Here are five stocks you may want to consider buying during the next market correction.

Image source: Getty Images.

starbucks

starbucks (SBUX -0.99%) is a global coffee chain with more than 34,000 stores worldwide. The company reported an encouraging set of earnings for the third quarter of its fiscal 2022, with net income up 9% year-over-year to a record $8.2 billion. Comparable store sales increased 3% globally, with the US posting a 9% increase, and active Starbucks rewards members up 13% year-over-year in the US to 27.4 million of members.

During its recent biennial Investor Day, Starbucks unveiled an ambitious three-year financial roadmap to deliver comparable annual store sales growth of 7% to 9%, revenue growth of 10% to 12% and earnings per share (EPS) growth of 15% to 20%. Founder and Interim CEO Howard Shultz also introduced incoming CEO Laxman Narasimhan, who will take up his new role on April 1 next year. With this plan, it looks like the company is accelerating to deliver steady earnings growth for investors.

Lululemon

Lululemon (LULU -1.58%) is a market leader in sportswear and footwear for yoga, running and training, providing innovative materials and exciting designs for its products. The results for the second quarter of fiscal year 2022 were impressive. Revenue increased 29% year over year to $1.9 billion, and comparable store sales increased 23% year over year. Net income increased 39.1% year-over-year to $289.5 million, partially driven by a one-time gain of $10.2 million from the sale of an administration building.

Lululemon has reported that supply chain issues are easing, allowing the company to make the products it needs to meet strong demand. The sports apparel company expects net income to grow at a three-year compound annual growth rate of about 26% and to post sales of between $7.87 billion and $7.94 billion by 2022.

okta

okta (OKTA -5.64%) is a software-as-a-service company that provides identity management services to more than 16,400 customers to help their systems set up secure and convenient access. Okta stock may be down nearly 72% year-to-date, but the company is still turning out the lights on its latest Q2 2023 earnings. Revenue grew 43% year-over-year, and subscription revenue increased 44% year over year. Subscription backlog improved 25% year-over-year to 2.8 billion, while billing increased 36% year-over-year.

Okta believes there is a huge opportunity for further growth, as the total market his business targets is around $80 billion. The company has identified several growth drivers and will implement them to drive its results. You will work to improve your platform and network and also use your successful “land and expand” strategy in large organizations. International expansion is also on the cards, with US revenue accounting for more than three-quarters of total revenue for the quarter.

docusign

If you are looking for a fast, secure and convenient way to digitally sign your business agreements, docusign (DOCU -6.14%) has a cloud service that provides this service. The company has over a billion users in 180 countries and also reported a strong Q2 2023 report card. Subscriptions and total revenue continued to rise, up 23% and 22% year-over-year, respectively. Turnover also saw a 9% year-over-year increase.

DocuSign believes its Cloud Agreement has a huge market opportunity with a total addressable market of around $50 billion. The company hopes to drive new use cases, such as notarization of documents and analysis. By expanding these new uses, DocuSign can drive greater adoption throughout the organization.

Chipotle Mexican Grill

Chipotle Mexican Grill (CMG -1.00%) offers an extensive menu of foods using responsibly sourced ingredients that contain no artificial colors, flavors, or preservatives. The Mexican food chain, which has 3,000 restaurants in the US and parts of Europe, reported continued growth in its second-quarter 2022 earnings report. Total revenue increased 17% year-over-year to 2,200 million dollars, and comparable store sales increased 10.1% year over year. Digital sales accounted for nearly 40% of revenue, demonstrating the success Chipotle had in moving to online ordering during the pandemic.

The company is forging ahead with new store openings and expects to open 235 to 250 new restaurants in 2022. The board of directors also approved an additional $300 million to be used for share buybacks.

yang royston has positions at Starbucks. The Motley Fool has booths and recommends Chipotle Mexican Grill, DocuSign, Lululemon Athletica, Okta, and Starbucks. The Motley Fool recommends the following options: $60 long calls in January 2024 at DocuSign and $85 short calls in October 2022 at Starbucks. The Motley Fool has a disclosure policy.

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