Regardless of whether you're a brand-new or longtime investor, the past four months have been challenging. Since the beginning of the year, the broad-based S&P 500 and nearly 126-year-old Dow Jones Industrial Average have declined more than 10% from their highs, which officially puts both indexes in correction territory.
It's been an even tougher go for the growth-focused companies that've led the market higher for more than a decade. The Nasdaq 100 -- an index comprising the 100 largest nonfinancial companies listed on the Nasdaq exchange -- is in a bear market, with a decline of 22% as of this past weekend.
Although big market declines can be unpredictable and tug on investors' emotions, they're historically the best time to put your money to work. This is especially true for growth stocks, which have a tendency to outperform when economic growth is slowing.
With the major indexes all correcting lower, the following three Nasdaq 100 stocks can confidently be bought hand over fist in May.
The first Nasdaq 100 stock that's begging to be bought during this market sell-off is China-based Baidu (BIDU -0.07%).
Baidu is contending with two headwinds that have weighed on its shares for more than a year. First, there's the markedly different approach to combating the COVID-19 pandemic being implemented by China. The country's COVID-zero strategy has resulted in stringent lockdowns and reduced economic activity. That's bad news for Baidu and its ad-driven internet search segment.
The other concern has to do with financial transparency. Rumors have swirled for a while that dozens of China-based stocks could be delisted if they don't comply with U.S. regulators' requests for transparent accounting and information about ownership. (The latter is to ensure a company isn't owned or controlled by a foreign government.)
While these are both significant concerns, neither will affect Baidu's long-term growth strategy, which remains intact.
For example, data from Global Stats shows that Baidu controlled nearly 80% of market share for internet search in China in March 2022. In fact, Baidu has consistently controlled between 72% and 80% of internet search share in the world's No. 2 economy since March 2021. Advertisers are fully aware that their best chance to reach consumers is through Baidu, which is what gives the company such impressive ad-pricing power. Despite the challenges presented by COVID-19, Baidu delivered 21% sales growth in this core segment last year.
However, Baidu is about more than just search-based ad revenue. The company has invested heavily in artificial intelligence solutions and cloud computing. These ancillary operations are growing at a considerably faster rate than its ad-driven segment (71% non-advertising sales growth in 2021), and they should generate higher margins as well.
Even with existing supply chain worries, Baidu looks like a bargain. This is a company that can sustain sales growth with percentages in the mid- to high teens, yet can be scooped up by opportunistic investors for just 12 times Wall Street's forecast earnings for 2023.
AstraZeneca is a bit of an anomaly within the Nasdaq 100 in that it's actually performed well this year. Shares of the company were higher by 14% year to date through last week. This outperformance has at least something to do with healthcare stocks being highly defensive plays. Since we can't control when we get sick or what ailment(s) we develop, there's a pretty constant demand for prescription medicines, medical devices, and healthcare services. In other words, no matter how bad inflation and the U.S. or global economy get, demand for AstraZeneca's prescription drugs shouldn't be affected.
The company's outperformance is also a reflection of accelerated growth from its oncology and cardiovascular (CV) segments. During the first quarter, oncology and CV total revenue jumped a respective 25% and 18% on a constant currency basis. The company's blockbuster oncology trio (Tagrisso, Imfinzi, and Lynparza) all grew sales by double-digit percentages (excluding currency fluctuations); sales of next-generation type 2 diabetes drug Farxiga were up a blistering 67% (on a constant currency basis) from the previous year.
Additionally, AstraZeneca made a genius acquisition of rare-disease drugmaker Alexion Pharmaceuticals in July of last year. Although there are risks in targeting the development of therapies to treat small pools of patients, the rewards, if successful, are immense. A company like Alexion that targets ultrarare diseases often faces little or no competition, and receives little pushback from insurance companies on the exorbitant list price of its treatments.
What's more, Alexion Pharmaceuticals did a bang-up job of protecting its cash flow for probably a decade to come by developing Ultomiris. Ultomiris is a replacement therapy for its blockbuster drug Soliris, which peaked at around $4 billion in annual sales. Ultomiris is administered less frequently, and over time should gobble up most of Soliris' net sales.
It's not often that a big pharma stock can deliver sustainable double-digit sales growth, but that's precisely what AstraZeneca offers investors. With shares at a reasonably low forward price-to-earnings ratio of 13, there's still plenty of time for seekers of either growth or value to pounce.
The third and final Nasdaq 100 stock to buy in May as the market plunges is semiconductor solutions company Broadcom (AVGO 0.59%).
If there's a nearly universal knock against semiconductor stocks, it's that they're cyclical. With the trailing-12-month inflation rate hitting a four-decade high and first-quarter gross domestic product declining 1.4%, there's a growing possibility of the U.S. entering a recession. A recession would likely mean a temporary slowdown in demand for chips and other semiconductor solutions.
But there's another side to this story that often gets overlooked when fear overtakes Wall Street. Even though recessions are an inevitable part of the economic cycle, they typically only last for a few months or a couple of quarters. By comparison, economic expansions are measured in years. Semiconductor companies like Broadcom are perfectly positioned to take advantage of these disproportionately long periods of economic expansion.
Aside from being a smart macroeconomic play, Broadcom has a couple of specific catalysts that can lift its valuation. Most notably, it's a direct beneficiary of the 5G wireless revolution. It'll likely take a few years for telecom providers to completely upgrade their infrastructure to support 5G throughout much of the country. But over that time, consumers and businesses will have the incentive to upgrade their wireless devices to take advantage of faster download speeds. Most of Broadcom's sales are of wireless chips and components used in next-gen smartphones.
Then again, Broadcom has ample opportunity to grow its ancillary operations, too. As I've previously noted, businesses have been shifting their data into the cloud at an accelerated pace in the wake of the pandemic. This should lift demand for practically anything having to do with data centers, and Broadcom supplies connectivity and access chips used in those data centers.
If you need one more reason to be bullish on Broadcom, consider this: The company ended 2021 with a record backlog of $14.9 billion. It was also booking orders into 2023, according to CEO Hock Tan.
With Broadcom, investors are getting a company that offers transparent operating cash flow and that has grown its quarterly payout by more than 5,700% in less than 12 years. It's an ideal stock to buy for growth, value, and income investors.