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When looking for stocks to add to a portfolio, it’s tempting to scoop up the day’s most popular players. The idea is: They’ve done well so far — and that momentum will continue. That’s true in some cases. But another way to find great long-term buys is to consider those stocks that haven’t done so well in recent times. How to pick out the ones that are likely to recover? Go for companies with strong future prospects — and don’t be scared off by their recent stock market performance.

Here, I’ll talk about three of my favorites: A biotech company that just reported its first ever profitable quarter, a company that’s leader in two growing markets, and a giant in the world of electric vehicles (EVs). Considering potential for revenue and profit ahead, each of these players could be ready to bounce back.

Image source: Getty Images.

1. Novavax

Novavax (NVAX -20.31%) stock has struggled since the company fell behind in regulatory submissions for its coronavirus vaccine candidate. Today, more than 35 countries have authorized the product. And Novavax just reported its first profitable quarter as a commercial-stage company thanks to the vaccine. The U.S. Food and Drug Administration hasn’t yet given the vaccine the nod. But the agency’s advisory committee is set to meet on June 7 to discuss the vaccine. So a decision may be on the horizon.

All of this sounds positive. Still, Novavax’s shares haven’t yet showed signs of a rebound. Investors were disappointed by first-quarter earnings because they fell short of analysts’ estimates. Novavax’s vaccine is still trying to gain traction in a competitive marketplace. But I think this is a short-term problem. Novavax needs time to carve out market share worldwide — and win additional orders.

I expect Novavax to show its strengths over the long term. It’s important to remember the company is leading in the development of a combined coronavirus-flu vaccine candidate. It’s announced positive initial trial results and aims to launch phase 2 later this year.

Novavax stock has plunged 62% this year. That means it’s trading at less than three times forward earnings. That’s a steal considering the role Novavax can play in the coronavirus market over the long term.

2. Amazon

Investors got used to enormous earnings growth from Amazon (AMZN -3.20%) during certain stages of the pandemic. But in recent quarters, that trend has tapered off. The e-commerce giant has struggled with the same problems as other retailers: supply chain issues, labor supply, and inflation. The company has also been making major investments in its business. For example, it nearly doubled its fulfillment network since the start of the pandemic.

 As a result, Amazon shares have lost 34% since the beginning of the year. Even news of an upcoming 20-for-1 stock split hasn’t helped restore momentum. The split will lower the price of each individual share — making it easier for a broad range of investors to buy the stock.

So, why could Amazon bounce back? It’s a leader in two growing markets: E-commerce and cloud computing. And cloud computing is actually a major revenue driver for Amazon. Last year, its Amazon Web Services (AWS) unit made up more than 70% of Amazon’s total operating income. AWS continued to post double-digit growth in revenue and operating income in the most recent quarter.

As for e-commerce, the issues Amazon faces now are temporary. And its Prime subscription membership numbers continue to grow. Once these headwinds subside, the loyalty of Prime members and Amazon’s investment in a vast fulfillment network should lead to more earnings growth.

3. Tesla

Tesla (TSLA -8.26%) shares have fallen for a variety of reasons in recent times. Some investors worry that CEO Elon Musk’s decision to buy Twitter will take his attention away from his role at Tesla. Investors are also concerned about competition Tesla may eventually face in the EV market. For example, Volkswagen said it aims to be the world’s biggest EV seller by 2025, according to Reuters.

But it’s important to keep in mind that other carmakers’ goals don’t necessarily weaken Tesla’s position. Tesla has dominated the U.S. EV market over time. And in the first quarter of this year, that’s still the case. Kelley Blue Book data shows that Tesla held 75% market share.. Tesla also reported a record quarter on many levels — including revenue and vehicle deliveries. Total revenue increased 81% to more than $18 billion. And vehicle deliveries climbed 68% to more than 310,000.

Tesla has also increased key measures such as quarterly income and operating margin.

TSLA Net Income (Quarterly) data by YCharts

As for the Twitter operation, it’s unlikely Musk will neglect his work at Tesla. We’ve seen he’s been able to manage multiple projects simultaneously.

Tesla shares have dropped 25% so far this year. And they’re trading for 63 times forward earnings estimates. That’s down from more than 160 just six months ago. Tesla’s growth, market share, and today’s share price mean one thing: It may be time to buy this innovative vehicle maker — and bet on a rebound.

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