The stock market is having a rough start to the year. The S&P 500 is down about 15% from its recent peak. Many stocks have fallen even more.
I try to view stock market sell-offs like this as opportunities to deploy some of my available cash into high-quality stocks when they're cheaper. I'm currently building a list of stocks I'd like to buy if the market continues declining. Topping that list are NextEra Energy(NYSE: NEE), Broadcom(NASDAQ: AVGO), and Invitation Homes (NYSE: INVH). I plan to invest another $500 across that trio if their shares fall a bit further.
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Plugged into a very powerful growth trend
NextEra Energy is a leading utility. It operates FPL, the country's largest electric utility in Florida. Meanwhile, its energy resources segment is one of the world's largest renewable energy producers. These businesses generate very stable cash flow.
Energy forecasters expect U.S. electricity demand to surge a staggering 55% by 2040, powered by data centers, especially to support artificial intelligence applications, as well as by the onshoring of manufacturing, the electrification of transportation, and other catalysts. That's providing NextEra Energy with abundant opportunities to invest in building more lower-carbon energy capacity. The company expects these investments to grow its adjusted earnings per share at or near the high end of its 6% to 8% annual target range through 2027. Meanwhile, earnings growth and its low payout ratio will propel around 10% annual dividend growth through at least next year.
Despite the expected surge in U.S. power demand, shares of NextEra Energy have already fallen more than 20% from their recent peak, driving up its dividend yield to 3.4%. If shares keep falling and the yield rises to more than 3.5%, I'd add to my position.
This fast-growing tech stock is getting cheaper
Broadcom is growing briskly. The semiconductor and infrastructure software company's revenue surged 25% in its fiscal 2025 first quarter, while its free cash flow jumped 28% to $6 billion. A big growth driver is AI, which propelled a 77% increase in sales of AI-related semiconductors.
The company expects to continue growing briskly. It sees its revenue rising by another 19% in the second quarter. The company's rapidly growing revenue and free cash flow should enable it to continue increasing its dividend. Broadcom hiked its payout by 11% late last year, its 14th straight year of boosting its payout.
Despite its robust growth, Broadcom shares have sunk more than 30% from their recent peak. That has knocked its valuation down to about 25.7 times forward earnings. While that's not exorbitant for a company growing as fast as Broadcom, it's higher than the broader market indexes. The S&P 500 trades at less than 20 times its forward earnings, while the Nasdaq-100 fetches nearly 24 times forward earnings. If Broadcom's stock continues to slide and its valuation falls closer to market levels, I'd pounce and add to my position.
This leading landlord is getting cheaper
Invitation Homes is a real estate investment trust (REIT) focused on owning and managing single-family rental properties. It currently owns over 85,000 homes outright, has interests in another 7,600 homes, and manages nearly 17,700 properties for third parties.
Demand for rental housing remains strong because of the significant affordability gap. It's currently about $1,100 cheaper a month to rent in its markets. That's keeping occupancy levels high across its portfolio, which is enabling the REIT to continue raising rents. However, economic and other concerns are keeping a bit of a lid on rent growth this year while inflation continues to affect expenses. Invitation Homes thus expects its net operating income to rise at a modest 2% rate this year.
The longer-term picture is much brighter. Rent growth should reaccelerate once the current economic uncertainty passes. Meanwhile, Invitation Homes continues to expand its portfolio. It buys houses directly from homebuilders as well as from other third-party sellers. It could capitalize on the current economic environment by ramping up its investment volume this year.
While the market has fallen nearly 15%, Invitation Homes' stock price is down less than 10%, pushing its yield up to 3.5%. If shares were to drop another 5%, I'd jump at the chance to add to my position.
Hoping for an even bigger markdown
Shares of NextEra Energy, Broadcom, and Invitation Homes have fallen along with the market this year. All look like appealing long-term investments at their current lower levels. However, I'd like to see if they sink even further before adding. That would give me an even lower starting point on these high-quality stocks, further increasing my future total return potential.
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Matt DiLallo has positions in Broadcom, Invitation Homes, and NextEra Energy. The Motley Fool has positions in and recommends Invitation Homes and NextEra Energy. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
