In March, when the market crashed, it seemed as if nothing was safe.

A few stocks spiked upward. For instance, Novavax has been having a great year. It's up 385% in 2020. Virtual healthcare provider Teladoc is another big winner that's benefiting from the rise in telehealth driven by the pandemic. But this positive news was limited to a small group of stocks.

For most companies, the stock market was a sea of red in March. And the rout affected stocks regardless of how COVID-19 might affect their sales and profits. But now, parts of the market are recovering and certain stocks are doing quite well. Some are actually up for the year.

A bull charging up a stock market line

Image Source: Getty Images

What stocks should you buy now?

Right now, I am seeing a bifurcation in the market. Many of the stocks in the virtual universe -- made up of internet retailers, gaming companies, and software-as-a-service (SaaS) providers -- are doing just fine in 2020. That's because the lockdown isn't hurting their business very much, if at all. People need the internet right now more than ever, so internet stocks are up for the year.

Companies like Amazon.com, Shopify, and Sea Limited are actually spiking in this environment despite the health crisis.

Company Stock on Jan. 2 Stock on April 16 Percentage Gain
Amazon.com $1,875 $2,388 29%
Shopify $403 $517 30%
Sea Limited $41 $53 32%

Data source: Yahoo! Finance.

On the other hand, real-world stocks, like restaurants and movie theaters, are getting cheaper and cheaper. That's because all these businesses are hampered by the COVID-19-driven lockdown, and it's still unclear how extensive the damage will be. The market hates this uncertainty, so the losses have been brutal, and these stocks are trading at historic lows.

For investors who prefer buying cheap stocks, there are options all over the place. Stocks I might start buying next week include IMAX (NYSE:IMAX), Park Hotels & Resorts (NYSE:PK), and Ruth's Hospitality Group (NASDAQ:RUTH). The major reason is that these are fundamentally strong companies and their prices are currently super cheap.

Company Stock on Jan. 2 Stock on April 16 Percentage Loss
IMAX $20 $9 (51%)
Park Hotel & Resorts $26 $7 (71%)
Ruth's Hospitality $21 $7 (67%)

Data source: Yahoo! Finance.

My thinking on this is fairly simple: Here are dominant companies hit hard by the COVID-19 pandemic. Sooner or later, the U.S. will reopen for business. Things will return to normal and the stock prices should revert to the mean.

So should we buy virtual stocks that are doing well in this environment? Or should we start buying the deep value stocks that will likely bounce back down the road?

What I bought this week

I decided to split the difference by buying more shares of virtual companies that are still negative in 2020. So I'm buying growth companies at value prices. 

As we are seeing with Shopify, Amazon, and Sea Limited, virtual stocks should be minimally affected by COVID-19 and the widespread lockdowns. Yet there are many virtual stocks that are down in 2020. I found three in my own portfolio. On Monday, I bought more shares of Adaptive Biotechnologies (NASDAQ:ADPT), Carvana (NYSE:CVNA), and Datadog (NASDAQ:DDOG).  

 

Company Stock on Jan. 2 Stock on April 13 Percentage Loss
Adaptive Bio $30 $25 (13%)
Carvana $93 $62 (33%)
Datadog $38 $37 (1%)

All three of these stocks are part of the virtual universe, meaning COVID-19 won't shut down any of these businesses.

Carvana

Of course, Carvana is a consumer-facing business (a retailer!), so you might think COVID-19 would be a disaster for the stock. Certainly, the market thought so at first. The price dropped all the way to $22 a share on March 19. But the important thing to remember is that Carvana is a virtual retailer that conducts its business online.

I don't know how many people are shopping for cars right now, but I do know that if you're shopping, you're doing it online. This health crisis is escalating many of the major trends we've seen over the last couple of decades. Virtual retailers are in a much stronger position than their brick-and-mortar counterparts.

Certainly, COVID-19 might wreak havoc on used car sales this year. This means that mom-and-pop used car lots are in big trouble. Many of those car sales will shift online during this mess, and Carvana will win many of those customers with its ease of use and optionality.

So while the used car market might get battered, I fully expect Carvana to continue to grab market share in any downturn.

Adaptive Biotechnologies

Adaptive is a biotech stock that is working with Microsoft to decipher the immune system. While there are many disruptions in the healthcare industry -- particularly in hospitals and clinical drug trials -- the disruption to Adaptive's business should be minimal.

Indeed, the company is now working with Amgen to find a drug for COVID-19. The company's focus on the immune system gives drug companies additional insights into how the human body responds to germs, viruses, and other biological threats.      

Companies fighting COVID-19 should do quite well in these market conditions. It doesn't make sense for a medical growth stock that's battling the illness to be down in this environment. Adaptive has a platform technology that users access online and COVID-19 doesn't post a threat to its business, which is why I'm buying more shares.

Datadog

Like Carvana and Adaptive, Datadog is a virtual company, a platform stock that's open for business around the world. It's a SaaS company that helps large companies track all their data.

Datadog has massive revenue growth. In its most recent quarter, the company reported close to 85% sales growth, year-over-year. While SaaS stocks took a beating due to this health crisis, the truth is that virtual companies with most of their business online should be fine.

Consumers are using the internet more in this environment, not less. Should a company turn off its website now? Or keep it going? And companies that use the internet to help with their business want to keep track of their data. This is another virtual company that should survive this pandemic and outperform in the long-run.

I'm looking for cheap stocks that I believe will recover from COVID-19 and the resulting recession. I don't expect any of these three companies to be harmed by the coronavirus pandemic or a prolonged economic downturn. So I'm using this crisis as an opportunity to buy shares in some of the world's strongest virtual companies.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.