Warren Buffett's mentor Benjamin Graham once said, "In the short run, the market is a voting machine but in the long run, it is a weighing machine." He understood that stocks are largely driven by investor sentiment, which is inherently fickle over the near term. Graham also knew, though, that business fundamentals matter over the long term.
Sometimes, investors' "votes" temporarily cause good stocks to decline. However, the underlying strong business prospects of those stocks still make them great picks for long-term investors. In fact, the temporary pullbacks make them even better choices because the stocks are available at more attractive prices.
We're seeing such opportunities in the market right now. Here are three no-brainer stocks to buy during the latest sell-off.
1. ExxonMobil
Anyone who's followed ExxonMobil (XOM -0.01%) for a while knows what happens with the stock when oil prices tumble. The correlation is so strong, it's almost as if a chain links ExxonMobil's share price with the price of oil. And both ExxonMobil's share price and oil prices have fallen in recent weeks.
But have ExxonMobil's long-term business prospects faltered? Not at all.
The company's earnings have increased more than $15 billion over the last five years, and its cash flow has jumped by more than $20 billion during the same period. ExxonMobil has delivered a five-year total shareholder return compound annual growth rate (CAGR) of over 17%.
The company believes it can keep the momentum going through the rest of the decade. ExxonMobil thinks it will be able to achieve earnings growth of over $20 billion and cash-flow growth of around $30 billion by 2030. It expects to generate average return on capital expenditures of roughly 17%. New products from technological innovations could open up a total addressable market of around $100 billion by 2030.
In the meantime, the stock is cheap with an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of only 6.4. ExxonMobil also pays an attractive forward dividend yield of 3.75%. I suspect investors who buy this stock on the dip will be glad they did a few years from now.
2. Nvidia
Nvidia's (NVDA -2.09%) share price has rebounded somewhat after sinking 13%. However, the stock is still well below its recent all-time high.
I have no doubt Nvidia will soon be back to its winning ways. The company is now shipping its highly anticipated Blackwell graphics processing units (GPUs).
CEO Jensen Huang described the demand for the new chips as "insane." He also predicted Blackwell will become Nvidia's most successful product ever.
The Blackwell launch doesn't mean Nvidia's revenue will temporarily dip, though. The demand for the company's Hopper GPUs remains strong while Blackwell production ramps up.
Roughly $1 trillion worth of investments in data centers around the world is shifting from general-purpose computing to accelerated computing, and Nvidia's GPUs are the gold standard for accelerated computing. No rival appears to be poised to dethrone the company anytime soon. This stock is still -- as it's been over the last 10 years -- a great pick to buy on any pullback.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.46%) reported disappointing results last week from a phase 2 study of suzetrigine in treating painful lumbosacral radiculopathy, a common cause of peripheral neuropathic pain. The non-opioid pain drug didn't achieve better results than placebo. The biotech stock immediately experienced one of its steepest plunges over the last few years.
However, investors seemed to be overlooking three key things in Vertex's announcement of those results. First, suzetrigine still met its primary endpoint of improvement in the Numeric Pain Rating Scale. Second, the company plans to advance the drug into phase 3 testing.
Third, Vertex's post-hoc analyses identified some potential clinical-trial design issues that could have caused the placebo results to be better than expected. The biotech leader will incorporate changes in the design of its pivotal clinical studies that should control the placebo response more effectively.
The day after Vertex's phase 2 results were announced, the U.S. Food and Drug Administration (FDA) made two approval decisions. The agency approved expanding Trikafta's label to include additional non-F508del variants. More importantly, the FDA approved Alyftrek in treating cystic fibrosis (CF). I predict this new product will become Vertex's most successful CF therapy yet.
I also expect Vertex will soon win FDA approval for suzetrigine in treating acute pain. The agency set a PDUFA date of Jan. 30, 2025 for its decision.
Vertex's revenue growth should accelerate in 2025. Over the next few years, the company is likely to have even more good news from its pipeline, with multiple programs in late-stage testing. Investors are voting down this stock right now, but I'm convinced the market "weighing machine" will view Vertex positively over the long run.
