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Stock Market Correction: 2 Bulletproof Stocks That Will Still Be Standing After The Dip

All of a sudden, stocks are crashing.

Investors are panicking as the Federal Reserve prepares to raise interest rates to cool off inflation. The Nasdaq entered correction territory, defined as a 10% pullback from a previous peak, and the Dow Jones Industrial Average and the S&P 500 were hovering on the brink of that this week, showing every sector is getting hit. The S&P 500 fell as much as 4% on Monday, and even though it recouped those losses by the end of the day, the volatility was enough to make any investor feel queasy.

With high-priced stocks crumbling in the market rotation, this is a good time to add some value-priced stalwarts to your portfolio. Keep reading to see two stocks that should withstand any market crash.

Image source: Getty Images.

1. Target

Target (NYSE: TGT) has arguably performed better than any brick-and-mortar retailer during the pandemic, but the stock still looks cheap at a price-to-earnings ratio of just 16.

Target's being priced like a sluggish retail stock, even though the company has much more growth potential than the market seems to believe. Comparable sales jumped 19% in 2020 and are up 14% through the first three quarters of 2021. While pandemic tailwinds had an impact on that performance, Target outperformed many of its peers, and gained market share in a wide range of categories. Its status as a multi-category retailer gave it an advantage over pure-play retailers like apparel chains.

Profitability also surged at Target, as its store-based fulfillment and curbside pickup offering, Drive Up, gave it an advantage over its competitors. Target's profit margins are nearly double those of retail operations at rivals like Walmart and Amazon because the company relies on its stores to fulfill most of its orders rather than a separate network of distribution centers that require high shipping costs. Through the first three quarters, 80% of Target's digital orders were fulfilled by stores, giving it a significant cost advantage over a typical e-commerce business.

The company has also found success in its private-label "owned brands," and it now has 10 of its own billion-dollar brands, which further differentiate it from competitors and increase customer loyalty. It's also opening small-format stores in underserved areas, tapping into a clear market opportunity in a way that no other retailer can.

Wall Street expects Target's growth to take a pause this year, but that seems unlikely given the momentum it's carrying from the pandemic, the weakness in many of its competitors, and its own moats. Management announced a $15 billion share buyback program, so it's ready to take advantage of any decline in the stock.

2. Meta Platforms

Facebook parent Meta Platforms (NASDAQ: FB) may be the most undervalued stock on the market. Despite its dominance of social media and early leadership in virtual reality and the metaverse, Meta trades at a price-to-earnings ratio of just 21. The company continues to put up blistering growth in spite of its own warnings and the impact of Apple's ad-tracking-transparency initiative, which is making it harder for Facebook's ad targeting to work.

For example, revenue jumped 35% to $29 billion, and operating income was up 30% to $10.4 billion. Meta has one of the most profitable businesses on the stock market, with an operating margin around 30%, showing how strong its pricing power and competitive advantages are. For many advertisers like the millions of small-and-medium-sized businesses that depend on Facebook, there's no other place to achieve the kind of reach and magnification that Facebook provides.

While its digital advertising business continues to grow briskly, the company is even more excited about its prospects in the metaverse, rebranding to Meta Platforms and restructuring its reporting segments under two categories: Family of Apps, which includes Facebook, Instagram and WhatsApp; and Facebook Reality Labs (FRL), its division devoted to virtual and augmented reality, where it expects to spend at least $10 billion this year. The upcoming fourth-quarter report will be the first one in this format and could show impressive results in FRL.

Thanks to its ownership of Oculus, Meta is now the leading virtual reality headset-maker, and the Oculus Quest 2 was such a popular gift this holiday season that the Oculus app was the most downloaded app in the U.S. in the days after Christmas, according to data from third-party app trackers.

With its strength in digital advertising, leadership in the emerging metaverse, and a dirt-cheap valuation, the Facebook parent looks like a no-brainer at its current price tag.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman owns Meta Platforms, Inc. and Target. The Motley Fool owns and recommends Apple and Meta Platforms, Inc. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.


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