Savvy investors know that a market downturn is to be expected every year or two and that it's not a great concern for long-term investors who don't plan to sell their stocks anytime soon. In fact, market downturns actually can be terrific times to buy stocks, as shares of many great companies will be on sale.
Here, then, are three stocks you might consider buying if the market heads south. (Note that the market has already dropped considerably in recent weeks, as of this writing -- so these companies are already trading at significantly lower prices than they had been not so long ago.)
Chipmaking titan Nvidia (NVDA 2.95%) specializes in graphics processing units (GPU), which are needed by the likes of gaming systems, cloud computing operations, and data centers. Nvidia has been incredibly successful in recent years. As recently as November, its market value topped $800 billion. That was then, though. More recently, its shares were down some 30% from their 52-week high, and Nvidia's market capitalization had sunk to a still-hefty $606 billion. Even with that drop, though, its stock has averaged more than 50% annual growth over the past decade.
Will the company keep growing briskly? Its future certainly looks rosy, as it's addressing new arenas such as robotics, artificial intelligence, self-driving cars, and more. In its third quarter, revenue surged 50% over year-earlier levels, with data center revenue up 55% and gaming revenue up 42%. Earnings per share (on a GAAP basis) soared 83%. CEO Jensen Huang expressed optimism, noting: "Demand for NVIDIA AI is surging, driven by hyperscale and cloud scale-out, and broadening adoption by more than 25,000 companies." (Q4 and full-year results will be released on Feb. 16.)
Some reasonably question whether Nvidia shares are actually at bargain levels. If you're interested in it, take a closer look. With this stock and the two below, you might want to buy now -- or if you suspect the market will drop further, you might just add them to a watchlist and wait for even lower prices.
Peer-to-peer hospitality business Airbnb (ABNB -0.47%) didn't even exist 16 years ago, but it already commands a market value recently near $100 billion. As of this writing, its shares are down about 29% from their 52-week high, in addition to an overall market downturn. Its shares have also been strained by the pandemic, which has curtailed much travel, though plenty of people have preferred to stay at Airbnb properties over commercial hotels.
It's fair to wonder whether Airbnb is overvalued, even with its depressed stock and its $100 billion valuation -- especially when you consider that Hyatt's market cap was recently $10 billion, and Hilton Worldwide Holdings' value was around $40 billion.
Airbnb is very different from traditional hotel companies, though -- chiefly due to its very light business model. A capital-intensive industry like traditional hotels needs to invest in building, maintaining, and staffing many hotels -- but Airbnb doesn't need to do that. It simply runs an online marketplace connecting hosts and guests and takes a cut of the transactions.
The company will release its fourth-quarter and full-year results on Feb. 15, but its third-quarter results were quite impressive, with revenue popping 36% year over year (YOY) and net income nearly quadrupling. Founder and CEO Brian Chesky noted: "The third quarter was Airbnb's best quarter yet. The pandemic has led to a revolution in how we live, work and travel and we're constantly innovating to meet this new way of traveling and living."
Streaming specialist Roku (ROKU -0.13%) has a lot more going on than you probably realize. It's perhaps best known for the small streaming devices that serve as hubs permitting us to access a host of channels, such as Netflix, Prime Video, Hulu, and much more. But it's also inside many smart TVs (its smart TV operating system is the market leader, in fact), and more recently, it's begun producing its own original content, aiming for its Roku Channel to become a key destination in the streaming universe -- perhaps even the next Netflix.
Roku recently sported a market value near $21 billion and a stock that's down more than 65% from its 52-week high. That decline isn't due to sluggish growth, though: Its third quarter featured revenue up 51% YOY and gross profit up 69%. Roku had 56 million active users at that point, and they streamed 18 billion hours of video -- with the Roku Channel a top-five destination.
These three growth stocks are ones on my own watch list, and I'm hoping to buy some shares -- perhaps after they dip further. If you dig into them a little more, you may want to add them to your own watch list. You might also just buy some shares -- or compromise and buy a portion of the position you'd like to have in them, aiming to buy more over time.