The stock market dipped briefly into correction territory last week as global events shook investor confidence before safely rebounding. No one is sure what's going to happen next between war, geopolitical maneuverings, and news of nuclear weapon movements, so it wouldn't be a surprise if the stock market sold off sharply, let alone collapsed.
Smart investors will already be prepared for such an event by owning defensive stocks that will be resilient in a downturn and keeping their powder dry so they can move swiftly when opportunity strikes. When stocks go on sale in a sell-off, savvy investors are ready to pounce because it's important to keep downturns in perspective.
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The Schwab Center for Financial Research says the average bear market only lasts about 17 months, and 80% of corrections since 1974 have not turned into a bear market. The pandemic-driven drop in the stock market in 2020 saw the Dow Jones Industrial Average lose 37% of its value between February and March, the worst drop on record. Yet it took the index less than 18 months to double after hitting that bottom.
Markets do sell off regularly, and those occurrences represent excellent opportunities to buy stocks that were too expensive to buy before. Here are three stocks that won't stop growing, even in a correction or a recession.
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1. DocuSign
DocuSign (DOCU 1.72%) suffered a stock collapse of its own in December after reporting earnings that came in below analyst expectations, suggesting the tremendous growth it enjoyed over the last two years was significantly decelerating.
With analysts worrying that customer spending habits "appeared to change overnight" and investing guru Cathie Wood selling out of her entire position in the company over the ensuing weeks, DocuSign has fallen 63% from its highs. That already puts it in oversold territory, but if there's a market crash that takes its stock down even further, investors should move to scoop up shares.
Business hasn't come to an end for the leading e-signature company -- it hasn't even declined. Growth is expected to occur at more historical rates of around 30%, which is nothing to sneeze at, and no one should have expected pandemic-driven growth to continue anyway.
DocuSign estimates its total addressable market is $50 billion, and with 1.1 million customers worldwide -- double the number from before the pandemic struck -- it should remain on an upward trajectory because the advent of a digital, remote-based economy requires its services.
Beyond capturing signatures, DocuSign has expanded into artificial intelligence (AI) to use the technology to scan documents, including legal paperwork, to identify risks. It is also investing in and partnering with start-ups in the agreements space. DocuSign Ventures will specialize in technologies that facilitate pre-agreement work and negotiation, as well as the logistics aspects and workflows that follow an agreement through the process of being signed.
DocuSign's profitable suite of applications shepherd contracts through preparation, signature, and follow-through. That's why, despite Wall Street's worries, analysts still expect revenue to grow to over $3.2 billion by 2024, up 64% from trailing revenue of $1.96 billion.
Any downdraft in DocuSign's stock on a market sell-off should propel forward-thinking investors to acquire shares.
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2. C3.ai
C3.ai (AI 3.79%) specializes in developing enterprise-scale AI algorithms that allow businesses to configure pre-built software to make data-driven decisions for customer engagement, fraud detection, network security, and supply chain.
While C3's technology is scalable to any industry, it made its name with large corporations and the energy industry, businesses that got clobbered during the pandemic as large centers of economic activity got turned off. That made the business a mess in fiscal 2021, comparatively, as revenue grew just 17% to $183 million and average contract value declined significantly.
Chairman and CEO Tom Seibel says the reason for this growth is that it's not after just "elephants" anymore, but rather is out "deer hunting and we're squirrel hunting and in a pretty big way at global scale."
In short, company management has learned the risks associated with counting on just a few big customers and is sharply diversifying its business to make its technology more relevant to businesses of all sizes.
That ought to protect it in any future downturns as it moves to make a little money off many clients. C3.ai recently partnered with Alphabet's Google Cloud to co-sell and service its applications globally. It also has deals with Microsoft, from which it has closed on $200 million worth of business as its apps all support Azure and Snowflake.
So it is looking for new small-game quarry but not ignoring enterprise-class customers either.
Wall Street expects C3.ai revenue to more than double over the next two years to $428 million and has a consensus one-year price target of over $51 per share, implying 138% upside in its stock.
