As economic uncertainty leads to stock market instability, long-term investors may find a chance to acquire quality stocks at favorable prices. While the extent of further declines in major indices remains uncertain, there are several compelling stocks to consider purchasing now. My top five picks are Intel (INTC -0.60%), AT&T (T -0.04%), International Business Machines (IBM -3.53%), Berkshire Hathaway (BRK.B 0.62%), and Paycom (PAYC -0.90%).
1. Intel
With a new CEO from outside the company set to implement significant changes, Intel is beginning another makeover. The company will likely undergo layoffs and cost-cutting measures as semiconductor veteran Lip-Bu Tan works to enhance its competitiveness as both a foundry and a product firm.
Although the Intel 18A process node is prepared, reaching mass production will take some time. A vital responsibility for Tan is securing additional foundry clients so Intel can realize the substantial investments in its manufacturing capabilities from previous years. The new transistors and backside power delivery technology could provide Intel an edge over Taiwan Semiconductor, and it’s also pivotal for Intel’s product strategy to reclaim market share from AMD. Given that Intel’s stock currently trades at low historical valuations compared to its book value, a hint of positive news could cause the stock to rise.
2. AT&T
The telecommunications leader AT&T has consistently grown its wireless and fiber subscriber base over the past few years. Although a challenging economic climate might dampen demand, AT&T is focusing on bundling its wireless and fiber services to retain customers.
Currently, around 40% of AT&T’s fiber customers also subscribe to its wireless services, leading to lower churn rates and increased lifetime customer value compared to non-bundled customers. Amidst an intensely promotional industry, the bundled offering should provide AT&T with a degree of protection. The company anticipates generating at least $16 billion in free cash flow by 2025, excluding revenues from DirecTV. With AT&T stock priced at roughly 12 times this free cash flow projection, it remains appealing, particularly given a solid dividend yield over 4% and upcoming share buybacks, which add further value.
3. International Business Machines
IBM’s journey over the last decade has been challenging. Initially blindsided by the surge of cloud computing, the company has since undergone a significant transformation. By exiting legacy sectors and pivoting towards hybrid cloud computing and artificial intelligence, IBM has returned to a path of sustainable, profitable growth.
The company expects its revenue growth to accelerate to at least 5% this year, spurred by its strategic decisions. IBM has booked over $5 billion in generative AI contracts, bolstered by its extensive consulting services, and its software segment experienced an 11% revenue increase in Q4 2024. With expectations of expanded pre-tax profit margins this year as IBM continues its shift towards high-value software, the company is poised to generate $13.5 billion in free cash flow for 2025. Priced around 17 times its free cash flow forecast, IBM stock appears to be an excellent investment, especially as it may prove somewhat resilient amid economic turbulence.
4. Berkshire Hathaway
Berkshire Hathaway possesses substantial cash resources as economic uncertainties grow, and Warren Buffett is prepared to use these funds for potential opportunities. At the end of 2024, Berkshire had an astounding $334 billion in cash and short-term investments, sufficient to pursue multiple large-scale deals.
Despite the likelihood that many of Berkshire’s operations may experience setbacks during economic downturns, its robust cash reserves provide a solid safety net. For a company like Berkshire, economic challenges create openings to engage in investments that others might shy away from, whether through outright acquisitions, seizing undervalued stocks, or other strategic arrangements that could ultimately benefit its shareholders.
5. Paycom
Paycom’s stock has faced significant challenges in recent years as it focused on promoting its automated payroll software. This platform not only lowers costs for clients but also provides substantial returns on investment; however, it inadvertently decreased other revenue streams, contributing to slower growth and a negative market reaction.
Paycom’s performance is closely tied to hiring trends and economic conditions, so its forecast of 8% revenue growth for 2025 is to be expected. The silver lining is that Paycom maintains a compelling value proposition with its automated payroll solution, which should appeal to businesses trying to minimize costs amid economic uncertainty. As conditions stabilize, Paycom could see renewed growth. Currently, Paycom’s stock trades at approximately 25 times the average analyst estimate for adjusted earnings in 2025. While the stock isn’t as undervalued as it was in mid-2024, it remains reasonably priced for a quality company. Although the stock may experience volatility for the time being, it represents a worthwhile consideration for long-term investors.
Timothy Green holds positions in AT&T, Berkshire Hathaway, Intel, International Business Machines, and Paycom Software. The Motley Fool also has positions in and endorses Berkshire Hathaway, Intel, International Business Machines, Paycom Software, and Taiwan Semiconductor Manufacturing. Furthermore, The Motley Fool recommends a specific strategy involving short May 2025 $30 calls on Intel. A disclosure policy is available for more information.
