If history is any indication, March should be a decent month for the stock market. A recent analysis by Liberated Stock Trader found that the S&P 500 has historically gained about 1% in March, on average, going back to 1970. It's not the best month (that would be November with an average 1.6% return), but it is better than February, May, June, July, August, and September, and it's tied with October.
Of course, these are averages, so certainly the month has its share of ups and downs. But if you are looking to add some long-term stocks to your portfolio this March, you can find some good fintechs at discounted valuations. Here are two great options.
1. PayPal
PayPal (PYPL -1.88%), the grandaddy of payment fintechs, has seen its price-to-earnings (P/E) ratio plummet over the past two years, from over 70 in the summer of 2021 to about 35 right now. That may still seem high for many stocks, but for PayPal, it is more in line with its historical range and, for the most part, as low as it has been since 2016.
Further, it currently has a P/E-to-growth (PEG) ratio of 0.85. Because that is below 1, it indicates a stock that is undervalued based on its five-year growth projections.
PayPal had been highly overvalued -- its stock price surged roughly 116% in 2020 and shot up to more than $300 per share in the summer of 2021. This was fueled by pandemic economics as lockdowns and social distancing forced more people to shop and pay online. But it crashed in the second half of 2021 and was down some 62% in 2022 as the bubble burst for many tech and overvalued stocks. At the same time, its growth in total payment volume slowed coming out of the pandemic, due to more people shopping in stores as well as inflation.
But overall, while growth may not have been at the astronomical levels of 2021 and 2020, total payment volume grew 13% year over year to $1.36 trillion in 2022, and revenue grew 10% for the year.
While economic headwinds remain in the form of a potential recession, inflation has come down and the company is bullish on its growth prospects, projecting 7.5% growth in revenue in the first quarter. For the full fiscal year, the company anticipates $3.27 earnings per share, which would be up from $2.09 last year. With tons of free cash flow and a more reasonable valuation, PayPal is poised for growth.
2. Nasdaq
Nasdaq (NDAQ 2.71%) is, of course, the company that runs the Nasdaq Stock Exchange. The company makes most of its revenue from trading on its indices, but it also generates income through subscriptions to its market intelligence and software-as-a-service (SaaS) offerings, as well as fees for listing on its indices and licensing them for mutual funds and exchange-traded funds.
Nasdaq is a great stock that, until 2022, hadn't had a negative year since 2009. Over the last 10 years as of Feb. 27, it has posted an average annual return of 18.4% and an average total return of 20.5% -- and it has a healthy dividend that it has increased for 10 straight years.
With the moat of being one of just a handful of index providers, along with its growing data and technology businesses, Nasdaq has been a steady earnings grower. Over the past 10 years, annual earnings per share has grown at an annualized 12.8% clip. Even last year, which was a difficult one, earnings per share was only down 4% for the year while annual revenue was up 5%.
There are a couple of good reasons why now is a good time to consider this stock. First, it did a 3-for-1 stock split last August, which brought the share price down to a third of what it was. Currently, Nasdaq stock is trading at just $56 per share. So it is a lower entry point, but it also has a reduced valuation as the stock price was down 11% in 2022 and is down 7% year to date in 2023. As a result, the P/E ratio is down to around 25, from over 30 at the end of 2022 and more in line with its historical range.
Nasdaq may struggle a bit in the near term, but as technology stocks continue to recover, so too will Nasdaq, the company known for its popular technology-focused indexes.
As we move into March, both Nasdaq and PayPal are relatively good bargains with great track records that should continue to be long-term growers.
Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends Nasdaq and recommends the following options: short April 2023 $70 puts on PayPal. The Motley Fool has a disclosure policy.
