The past three months have served as a reminder to new and tenured investors that stock market corrections are commonplace. Both the widely followed S&P 500 and iconic Dow Jones Industrial Average have declined by more than 10% since the beginning of the year, while the growth-focused Nasdaq Composite briefly entered bear market territory.
Although corrections and bear markets are rarely, if ever, cheered, they're the perfect opportunity to invest in high-quality companies at a discount. Even though we'll never know precisely when a correction will start, how long it'll last, or how steep the decline will be, we do know that bull markets eventually erase all notable drops in the major U.S. indexes.
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Best of all, you don't need a mountain of cash to take advantage of these stock market sell-offs. Since most online brokerages have abandoned commission fees and minimum deposit requirements, any amount of money -- even $1,000 -- can be the ideal amount to invest.
If you have $1,000 ready to invest, and it won't be needed for bills or emergencies, the following three stocks would make for no-brainer buys during the market sell-off.
Broadcom
To begin with, any notable pullback in semiconductor solutions company Broadcom (AVGO -1.84%) would be the perfect time to put $1,000 to work. Although tech stocks have taken it on the chin during the market sell-off, Broadcom offers a number of key advantages.
First, it and its semiconductor peers are cyclical. This means they tend to perform well when the U.S. and global economies are expanding, and they struggle when contractions and recessions arise. The important thing to note is that, while recessions are inevitable, the U.S. and global economies spend a disproportionate amount of time growing. Thus, semiconductor stock holders tend to benefit over long periods of time from the natural expansion of the domestic and global economy.
On a more company-specific basis, Broadcom appears to be a prime beneficiary of the 5G wireless revolution. It's been roughly a decade since wireless download speeds were meaningfully improved, which is expected to lead to a steady device-replacement cycle at the consumer and enterprise level. Broadcom generates the bulk of its sales from providing wireless chips and components used in next-generation smartphones.
But smartphones aren't Broadcom's only steady growth opportunity. The company is also a key supplier of connectivity and access chips used in data centers. With businesses moving more data than ever online and into the cloud in the wake of the pandemic, data center demand should fuel growth at Broadcom.
Another reason Broadcom is a no-brainer buy is its backlog. In fiscal 2021, the company's backlog grew 15% to $14.9 billion, with CEO Hock Tan noting in December that orders were effectively booked through 2022 and into 2023. Pandemic-related supply chain concerns have created the perfect demand storm for Broadcom.
As one final note, Broadcom has grown its quarterly dividend by more than 5,700% over the past 11 years. With investors netting a market-topping 2.6% yield, Broadcom looks like a steal at less than 18 times Wall Street's forecast earnings for fiscal 2022.
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Exelixis
Another no-brainer company to buy with $1,000 during the market sell-off is cancer-focused biotech stock Exelixis (EXEL -1.66%).
One of the great aspects of healthcare stocks is that they're highly defensive. No matter how well or poorly the U.S. economy and/or stock market are performing, people still get sick and require prescription medicine, medical devices, and healthcare services. This creates a predictable level of demand for healthcare stocks throughout the treatment chain.
If you want to know what makes Exelixis tick, look no further than blockbuster therapy Cabometyx. The drug is approved to treat first- and second-line advanced renal cell carcinoma (RCC), as well as previously treated and advanced hepatocellular carcinoma (HCC). These indications helped push the company's lead drug above $1 billion in net sales last year.
Keep in mind that Cabometyx hasn't always been a success. In 2014, the company's lead drug whiffed in clinical trials as a treatment for prostate cancer. More recently, it failed to provide a statistically significant improvement in median overall survival in a first-line HCC study. But because it's being studied in dozens of clinical trials, even a handful of label expansion opportunities can positively alter its outlook.
As an example, a study involving Bristol Myers Squibb's cancer immunotherapy Opdivo in combination with Cabometyx led to this duo getting the nod from the Food and Drug Administration in first-line RCC.
Because Cabometyx is such a cash cow, the company is now sitting on $1.85 billion in cash, cash equivalents, restricted cash equivalents, and investments, and it's been able to aggressively invest in new cancer-fighting compounds. Data from a number of early-stage studies on new compounds is expected this year.
Investors can buy into Exelixis for 19 times Wall Street's expected earnings in 2023 despite the fact that sales growth remains in the double digits and the company's cash and cash equivalents equate to 26% of its market cap. That's a fantastic deal for growth and value seekers.
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Meta Platforms
The third no-brainer stock to buy with $1,000 as the market sells off is Meta Platforms (META 1.54%), the company previously known as Facebook.
There are two issues that have combined to wallop shares of Meta since the year began. First, there's concern about how Apple's iOS privacy changes could impact its ad-driven platform. And second, Wall Street and investors have taken notice of Meta's significant increase in capital expenditures, which are primarily tied to investments in the metaverse -- the metaverse being the next iteration of the internet where connected users can interact with one another and their surroundings in 3D virtual environments.
While the Apple iOS privacy changes could have some impact on Meta's ability to generate ad revenue, fourth-quarter data shows that these concerns are likely overblown. Meta ended 2021 with 3.59 billion monthly active users (MAUs) across its family of products, including 2.91 billion Facebook MAUs. This equates to more than half the world's adult population visiting a Meta-owned asset at least once monthly. Advertisers are well aware that there's not another platform they can go to where they'll have access to such a broad audience. As a result, Meta's ad-pricing power remains top-notch.
To build on this point, Meta generated nearly all of its $114.9 billion in advertising revenue last year from Facebook and Instagram. Even though WhatsApp and Facebook Messenger remain among the most-visited and most-downloaded apps, neither has been meaningfully monetized. This shows Meta has plenty of levers still to pull in the growth column.
Something else being overlooked is Meta Platforms' cash generation. The company brought in $46.8 billion in income from operations in 2021 and is sitting on more than $33 billion in net cash. There's plenty of capital for the company to invest in metaverse/virtual reality initiatives without adversely affecting the cash-cow ad operations.
Considering that Meta Platforms is the dominant social media player and is growing by a double-digit percentage, it seems almost criminal that its forward-year price-to-earnings ratio (according to Wall Street's consensus) is only 15. This could be the bargain of a lifetime for patient investors.
