It's a matter of when, not if, the market crashes. While the benchmark S&P 500 has pulled back from the all-time highs it started the year at, the possibility of a major sell-off looms large.
James Bullard, the president of the St. Louis branch of the Federal Reserve just declared it's "fantasy" to think the worst inflation the country has experienced in 40 years is going to be cured by small, incremental increases in interest rates. He says the Fed needs to aggressively raise interest rates to the point where they stop economic growth like former Fed chairman Paul Volcker did in the early 1980s when he hiked rates as high as 20%.
That did stop inflation in its tracks, but it also wrecked the economy and sent it plunging into a recession. While Bullard is hopeful the Fed can negotiate a soft landing, investors (and everyone else) should be prepared for the worst. Ending decades worth of runaway spending in Washington that was fueled by the Fed's own easy money policies won't be painless.
Finding stocks that can weather such volatility will be essential to preserving your portfolio's value for when the recovery begins. The two stocks below offer a good opportunity to do just that. Putting these two growth tech stocks in your portfolio could help shield it from the worst of a market plunge.
Artificial intelligence will play an increasingly outsized role in all aspects of a business's operations, whether its data security, customer engagement, or a smooth operation of its supply chain. C3.ai (AI -3.19%) offers a solution that covers all of those scenarios and more, giving companies a comprehensive product they can configure to their individual needs.
In the past, C3.ai targeted a core group of enterprise-class customers, a strategy that took its toll during pandemic lockdowns as large swaths of economic activity turned off. The company learned a harsh lesson and has since gone into overdrive to capture a more diverse clientele by making its technology relevant to users of all sizes. Revenue jumped 42% year over year in the fiscal 2022 third quarter as the number of customers it serves increased 82% to 218, spanning across 15 different industries.
C3.ai recently partnered with Alphabet's Google Cloud to co-sell and service its applications globally, and it's collaborating with Microsoft to improve the technology available for customers across various industries, including energy, financial services, manufacturing, telecom, and the federal government, which recently awarded it a five-year, $500 million contract for the U.S. Department of Defense.
The stock is down 74% from the high it hit last year, and though it's still incurring losses, it has $1 billion in cash available to fund its growth here and abroad.
Payment services provider PayPal (PYPL -2.14%) is another top technology stock that has been bludgeoned by the market with shares down 67% from their all-time high. Shares really cratered earlier this year, though, when its guidance fell far short of Wall Street's predictions, and the company said it was going to try something different for its growth strategy. While the market didn't like what that "something different" means, the bearish response is now a chance for investors to buy a still-growing company at pre-pandemic prices.
PayPal said it anticipates bringing in only 15 million to 20 million new active users in 2022, a third of what it added last year and less than half the 53 million users analysts were anticipating. Arguably, the bigger news was the company's goal of extracting more money out of existing users rather than adding more accounts.
That's actually a smart play. Customer-acquisition costs are always more expensive than tapping into existing customers. But as the economy increasingly goes digital in the payments space, PayPal is at the forefront of this trend, and there is still plenty of opportunities for the company.
Even as online shopping surged in 2020, a phenomenon that has cooled off slightly since the economy reopened, PayPal still recorded 45.4 transactions per active account in 2021 (or 19.3 billion transactions from 426 million active users) versus 40.9 in 2020. Going where the customers already exist can still drive growth and at a lower cost.
PayPal trades at just 29 times trailing earnings, near its all-time low for this metric. With Wall Street still expecting revenue to double by 2025 and per-share profits to nearly triple, this discounted fintech stock is ripe for the picking.