Constructing a portfolio with stock picks that fit investors’ overall risk profile right now is difficult. Many investors are now feeling the pain volatility can provide in the short-term. High-quality and low-quality stocks are getting sold off, in what seems like indiscriminate fashion.
However, investors may notice that higher-quality stocks are holding up well. Those with solid balance sheets, strong growth prospects, and the ability to turn a long-term profit are much more attractive than those on the more speculative end of the spectrum.
Of course, sifting through and identifying which stocks may be worth buying on this dip isn’t easy. Timing the market is a dangerous strategy, and most long-term investors agree that time in the market is a much better indicator of long-term returns.
With that in mind, let’s look at seven top stock picks that may outperform this coming decade. Many of these stocks on this list have already had incredible runs. Some are higher quality than others (it would be boring to pick a list of stocks from the same sector). But all the stocks on this list have strong growth prospects and some sort of moat around their underlying business I think is worth considering.
Advanced Micro Devices (AMD) logo on blue background with Ryzen and Radeon brands
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Advanced Micro Devices is a company that I’ve been following more closely of late. A key semiconductor player, AMD benefits from the current supply and demand fundamentals in the chip manufacturing space. For those who have been living under a rock, there’s a chip shortage. This is terrible news for companies that rely on chips for their goods, but a great thing if you’re an AMD.
AMD produces high-quality chips used in growth sectors such as gaming, AI, and electric vehicles. For those looking for a “picks and shovels” play on these growth sectors, AMD is a noteworthy pick.
Currently, AMD stock trades a little more than 30% off its high, like many growth stocks. However, given the robust fundamentals underpinning this company’s business, it’s a stock worth considering on this selloff.
I think the company’s recent strong earnings, combined with projections that the semiconductor market could grow from $452.25 billion in 2021 to $803.15 billion in 2028, make this a top stock pick for long-term growth investors to consider right now.
Nvidia Corporation (NVDA)
Nvidia (NVDA) logo on the indoor wall of a corporate building made of yellow tiles
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Okay, let’s stick with the chip makers for a second.
Nvidia is another top-notch semiconductor manufacturer that’s leading the way. Like AMD, Nvidia focuses on higher-end chips, aimed at similar sectors. Notably, Nvidia has made a commitment to increase the company’s focus on the metaverse and crypto mining, two sectors many long-term investors may like for their growth potential.
The world’s computing power continues to increase in incredible fashion. As a future supplier of the sort of robust GPU processing capabilities needed for such resource-intensive sectors, Nvidia stands to benefit from an increasingly complex, tech-driven world.
This company’s stock price has tumbled more than 25% from its recent all-time high, though Nvidia still remains the world’s largest semiconductor company. Hopes were that Nvidia could become the next trillion-dollar company, before this recent bout of volatility hit.
Bottom line: those bullish on the future of the semiconductor space ought to take a look at both AMD and Nvidia right now.
Top Stock Picks: Coinbase (COIN)
The Coinbase (COIN stock) logo on a smartphone screen with a BTC token.
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Okay, now to a more speculative pick.
As one of the most well-known crypto exchanges in the world, Coinbase has seen impressive growth in recent years, mainly due to the rapid rise of cryptocurrencies as mainstream investable assets. In some ways, Coinbase helped turn the crypto sector into an investable one. The company’s easy-to-use trading platform has brought many unsophisticated investors and those who have watched crypto from the sidelines for some time into the game.
As a trading platform, Coinbase currently earns the vast majority of its revenue from transaction fees. With trading fees across the sector already seeing reductions, Coinbase stock has been under pressure. Of course, declining crypto valuations also do not bode well for the near-term outlook for this crypto trading giant.
That said, those taking the longer view of Coinbase as an essential piece of the crypto ecosystem may like this stock. It’s trading at a much more reasonable valuation multiple, with tremendous growth potential, should crypto continue higher over time.
Domino’s Pizza (DPZ)
Domino's (DPZ) sign on a building at night
Source: Shutterstock
From speculative to stable — what’s more stable than pizza?
Domino’s Pizza is among the most well-recognized names in the business. This company’s stock price has been on a tear, more than doubling over the past five years. This company’s defensive business model, combined with solid growth in recent years, has led to a surging valuation. Currently, Domino’s is valued at around 35-times earnings.
One of the factors that’s hurt Domino’s over the past month or so has been inflation concerns. As the price of basic ingredients rise, Domino’s is likely to continue raising its prices. This pizza chain has done so for the first time in a while recently. Should price increases persist, investors may take the view that inflation could eat into margins over time.
That said, it appears consumers are not as price-sensitive as many would have thought. Recent strong results suggest this is a company that can handle inflation, at least right now.
Those looking for a stable, long-term growth stock may want to look at Domino’s, particularly on any additional dips moving forward.
Top Stock Picks: Netflix (NFLX)
the netflix (NFLX) logo displayed on a sign outside
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One of the biggest winners from this past decade has been Netflix. As it turns out, streaming has become big business. Cord-cutting and other secular catalysts investors were unsure of a decade ago have persisted in incredible fashion. Today, Netflix controls a sizable chunk of the overall streaming market globally.
Over the past 10 years, shares of Netflix have been a near-25-bagger for investors. That’s after this stock’s recent decline from its peak. Currently, NFLX stock trades at a discount of nearly 45% from its peak late last year.
Of course, this is a stock that’s also felt near-term headwinds. Subscriber growth has slowed, as per the company’s recent results. Forward guidance suggests this stock may grow more slowly than other predicted. Additionally, higher interest rates means borrowing money gets more expensive. As it turns out, Netflix has taken on quite a bit of debt to produce the content it does every year.
That said, expectations are that Netflix will be able to fund its content budget from company cash flows moving forward. The potential for debt repayment and potentially increased share buybacks are always a good thing for investors. Those thinking truly long-term may like buying this top stock pick during this dip.
Altria Group (MO)
Altria Group, Inc. (MO) logo of US producer and marketer of tobacco and cigarettes is seen on a mobile phone screen.
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Shares of the world’s largest tobacco company, Altria Group, are either highly loved or hated. Given the terrible health effects, many investors prefer to stay away from cigarette producers.
However, MO stock is not just an ultra-high-yield dividend play; most of its sales come from non-cigarette-related businesses. Over the years, Altria has expanded its product line to include e-cigarettes, vapes, cannabis-related products, etc. This shift makes Altria less of a sin stock and is now more aimed at promoting a reduction in tobacco usage, which is attracting investors worldwide.
Thus, despite a decline in its core cigarette business, the company’s sales have increased 9% over the last five years due to its non-cigarette segments.
Altria’s uphill growth trajectory is promised by its high dividend yield. This company has raised its dividend for 51 consecutive years and offers an impressive 7.2% dividend yield. From FY2016 to FY2020, the company has paid dividends worth $27 billion.
Along with this, Altria Group maintains a robust non-generally accepted accounting principles (GAAP) earnings per share (EPS) and free cash flow (FCS), reassuring investors of its ability to fulfill dividend obligations. Given its profitability, MO stock is a rare cheap buy for income-oriented investors, trading around $50 at the time of writing.
Top Stock Picks: Upstart Holdings (UPST)
The website for Upstart (UPST) is viewed through a magnifying glass focused on the company's logo.
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Finally, we have Upstart, one of the high-growth stocks I think is worth a look on this recent dip. Indeed, shares of this consumer lending company have tumbled significantly, falling more than 70% from its high approximately three months ago. That said, I think the market is providing what could be a nice opportunity here.
Indeed, one can argue that UPST stock was insanely overvalued at the $400 level. However, at the $90 level today, Upstart is starting to look attractive. This company now trades at a price-earnings ratio of around 90, which for a company of this growth caliber is attractive.
Upstart’s stellar revenue growth of 250% year-over-year in the third quarter of 2021 suggest there’s a lot to like about this company. Upstart is profitable, and is growing its business in a profitable way. A key AI and big data-focused company providing credit scoring solutions to lenders, Upstart’s platform could be key to loan growth during these times of rising interest rates. Thus, those seeking an interesting contrarian play may want to consider this top stock pick.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
