The S&P 500 index has dropped more than 13% since the beginning of 2022, although rising from its October 2022 lows. However, as a bull market is anticipated, many good company stocks that have corrected during the recent bear market could outperform the index. Among those companies, Tesla and Brookfield Infrastructure (BIP, BIPC) have continued to thrive despite their struggling stocks. Their share prices are expected to significantly recover when the market turns, albeit for different reasons. Diversifying by owning both stocks could be a good strategy to prepare for the next bull market.
Tesla
Despite the company’s successful operations, the price of Tesla’s shares has dropped by 50% in the last year. The high levels of speculation and anticipated growth that were previously accounted for in the stock’s worth are to blame for the decline in share price. However, the business has since met its growth targets and is producing sizable amounts of cash flow and profits.
In the present, this cash flow is being invested back into the company, with multibillion dollar investments in its energy segment and the building of a fifth electric car plant in Mexico. This includes a $3.6 billion investment to increase the battery production capacity at its Nevada gigafactory, which creates energy modules and battery packs for energy storage in addition to battery cells for electric vehicles. Tesla’s revenue increase during the previous year was significantly influenced by the energy sector.
Energy generating and storage sales provided roughly 7% of Tesla’s revenue in the first quarter of the year, which is twice as much as it did in the same time last year. Along with its other divisions, Tesla’s vehicle sales are anticipated to rise in line with the expectation of a new bull market in an expanding economy. Tesla’s fundamental business continues to succeed, and the stock is anticipated to follow suit, so it’s a wise decision for investors to keep shares of the firm, even if it’s questionable whether the stock will recover fast or go higher in the near future.
Brookfield Infrastructure
The rise in the cost of capital brought on by the Federal Reserve’s raising interest rates to fight inflation has an impact on the shares of Brookfield Infrastructure Partners. When interest rates eventually fall, it is anticipated that Brookfield’s investments and its stock price will benefit, possibly triggering a surge in the following bull market.
Brookfield Infrastructure Partners is still expanding its business, despite the current environment of increasing interest rates. The $13.3 billion acquisition of the largest owner and lessor of intermodal containers in the world was just disclosed by the firm. This acquisition adds transportation logistics infrastructure to Brookfield’s existing portfolio of global assets, which already includes transportation, utilities, energy transmission and storage, and data transmission.
Although Brookfield Infrastructure Partners’ stock has struggled recently due to higher interest rates, the company has continued to grow its business and recently announced a $13.3 billion takeover of Triton International, the world’s largest owner and lessor of intermodal containers. Despite the stock’s performance, Brookfield’s funds from operations increased by 12% in 2022. The partnership shares offer a higher dividend yield of about 4.2% compared to the corporate shares, which come at a premium.
Although the partnership shares add complexity to tax reporting, investors who are comfortable with that may benefit from potential price appreciation and the company’s proven ability to allocate capital efficiently. With a potential downward cycle in interest rates, Brookfield may become even more efficient at adding assets, allowing investors to share in the returns and enjoy a solid dividend yield.
Article Reference by fool.com
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