The S&P 500 and Nasdaq-100 indexes have rebounded significantly from the lows we saw after President Donald Trump's "reciprocal" tariff announcements in early April. However, while the major indexes may no longer be in bear market territory, there are some excellent stocks that still are.
An index or individual stock is often said to be in a bear market after it has fallen more than 20% from its recent highs. Here are three stocks down by significantly more than 20% compared with their 2025 peaks that could be excellent long-term investments right now.
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The early signs of this turnaround are strong
Starbucks (NASDAQ: SBUX) rocketed higher in mid-2024 when the struggling coffee chain hired rockstar foodservice CEO Brian Niccol, but it has since given back most of that rally.
However, Niccol's "Back to Starbucks" plan is showing strong early results, with changes like a simplified menu, a renewed focus on trimming customer wait times, and improvements to the in-café experience resonating with consumers. In the most recent quarter, nearly all customer-related metrics improved sequentially. For example, comparable store sales declined 4% year over year, but this is a significant improvement from the 7% decline reported in the prior quarter.
While I wouldn't exactly call Starbucks a cheap stock (it trades at about 27 times earnings), it's also worth noting that margins are temporarily squeezed due to accelerated investment in Niccol's initiatives. In the latest quarter, operating margin declined by nearly four percentage points to 11.9%. But if the turnaround continues and margins rebound (which they should), this iconic company could be a home run for patient investors.
Management is hard at work, but the numbers don't show it – yet
PayPal's(NASDAQ: PYPL) growth essentially stalled after the COVID-19 pandemic ended, and the company decided to replace its entire leadership team, starting with new CEO Alex Chriss, a former Intuit executive. Chriss and his team have been hard at work, first focusing on efficiency and then on growth initiatives.
So far, the results have been solid. The efficiency efforts have grown earnings significantly. However, while some promising growth initiatives have launched, they aren't reflected in the numbers just yet. A good example is the company's advertising platform, which is led by the former head of Uber's advertising efforts. It just launched in October, so it will take a little while before it's apparent in the results, but this is a high-potential business.
Looking ahead, PayPal management sees massive opportunities to boost monetization of Venmo, to capture more share of the offline payment market, and to ultimately consolidate the company's platform and build a more cohesive ecosystem. In all, PayPal believes it can produce 20% or greater annual earnings growth over the long term, and if it can deliver, it could be a massive bargain at just 123 times forward earnings.
A high-momentum fintech stock with a lot to love
SoFi Technologies(NASDAQ: SOFI) stock is trading down by nearly 30% from its January high, but there's a lot to like about this business.
For one thing, it has excellent momentum, with 34% growth in the user base in 2024 and 26% revenue growth. Plus, 2024 was SoFi's first full year of profitability, and management sees earnings increasing significantly over the next few years. Plus, the relatively new third-party loan platform has received some big capital commitments this year.
As SoFi grows, there's a tremendous opportunity to strengthen customer relationships and build its ecosystem, especially if rates fall and loan demand surges. Right now, the average SoFi customer has fewer than 1.5 products (a product is something like a loan, bank account, credit card, etc.), and cross-selling products to its rapidly growing existing customer base could be a big tailwind in the coming years.
Expect some near-term turbulence
To be clear, I own all three of these stocks, but I own them because I like them as long-term investments. I have no idea what they'll do over the next few weeks or months, and that's especially true with the tariff uncertainty, potential for a recession, and other economic headwinds.
If you invest in any or all of these three stocks, it would be wise to expect a bit of a roller coaster ride, at least until we have some more certainty on trade policy, interest rates, and the general direction of the U.S. economy. But these are three stocks trading at attractive values that are worth a closer look for risk-tolerant long-term investors.
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Matt Frankel has positions in PayPal, SoFi Technologies, and Starbucks. The Motley Fool has positions in and recommends Intuit, PayPal, Starbucks, and Uber Technologies. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
