A bull market in stocks is looking increasingly likely in 2023. The S&P 500 (the world’s most followed stock index) has already risen 15.56% from its 2022 lows. If it reaches a 20% gain, then we will be in a confirmed bull market.
It’s too early to say for sure that we will enter a bull market, but some signs look encouraging. Inflation is easing off. People are still getting hired. The March banking crisis appears to be over. These positive signs could signal a big move in the stock market.
In this article, I will explore three stocks that I have been buying to prepare for a future bull market.
TD Bank
Toronto-Dominion Bank (TSX: TD) is a bank stock that I have been buying for many years and have made good returns on. I first started buying it all the way back in 2018. I bought some more in the March 2020 stock market crash and some more again in 2022. At this point, it’s the single biggest holding in my portfolio.
Why do I like TD Bank stock so much? It comes down to a few different factors.
First, it’s relatively cheap, trading at 9.5 times earnings and 1.3 times book value.
Second, it is growing, having increased its revenue by 7% and its earnings by 8.4% per year for the last five years.
Third and finally, it has some catalysts on the horizon, such as potentially closing the First Horizon deal, which would add about $1 billion a year to TD’s net income.
Unlike many banks, TD has a great liquidity position, with more than enough cash and liquid investments to cover potential withdrawals. So, it’s a pretty good bank at the moment.
Bank of America
Bank of America (NYSE: BAC) is another bank stock I’ve been buying ahead of the next bull market. It’s even cheaper than TD Bank, trading at about the same earnings multiple while also being slightly below book value.
Bank of America has enjoyed solid growth and profitability in its recent quarters. In its most recent quarter, it delivered $0.84 in diluted earnings per share, up 15%, and $26.3 billion in revenue, up 13%. That’s pretty strong growth for a financial services company in 2023.
This year, many banks have outright collapsed due to bank runs and unrealized losses on treasury securities. Some smaller banks got hit with a save of withdrawals and because their treasury investments declined in value, they couldn’t afford to pay their depositors off. Bank of America not only survived but actually thrived in this environment.
Taiwan Semiconductor
Taiwan Semiconductor Manufacturing (NYSE: TSM) is another stock I’ve been buying ahead of the next bull market. It’s a Taiwanese company that — as the name implies — manufactures semiconductors (i.e., computer chips.
Many semiconductor companies are seeing their earnings decline this year, as they’re dealing with a loss of demand for their products. In its most recent quarter, TSM delivered small, positive growth in revenue and earnings. Its earnings did go down in U.S. dollar terms, but not by nearly as much as what was seen in other semiconductor companies in the same period.
Overall, TSM is a best-in-class semiconductor stock.
