Stock Market Sell-Off: 3 Top Growth Stocks to Buy and Hold in May (and Beyond)

A market crash is a sudden and dramatic drop in prices across a broad index of stocks, usually by at least 20%. The description is open to some interpretation, but many investors would argue that we've crossed that threshold. The growth-heavy Nasdaq Composite is down 28% from its high, and the broader S&P 500 has fallen 17%. What should you do?

It never feels good to lose money, but it's the price of admission if you want to participate in the stock market. In the last six decades, the S&P 500 has fallen by 10% or more on 31 different occasions. That's roughly once every 1.9 years. However, excluding the current situation, the losses from each of those market crashes were subsequently wiped away by a bull run. Put another way, now is likely a good time to put money into the market.

Here are three top growth stocks you might want to consider buying in May and holding onto while the market works its way back to recovery.

Image source: Getty Images.

1. Amazon

Companies with a durable competitive advantage often make great long-term investments, especially when they compete in growing industries. Amazon (AMZN 1.30%) checks both of those boxes. It has positioned itself as a leader in e-commerce and cloud computing, and both markets are expected to grow at a double-digit pace for (at least) the next few years.

Rising costs have put pressure on Amazon's financial performance in the last few quarters, but the company has still grown at a steady clip over the last three years.

Data source: YCharts. Chart by author. TTM = trailing-12-months. CAGR = compound annual growth rate. EPS = earnings per share.

To some extent, Amazon's success can be attributed to its first-mover status. As a pioneer in both e-commerce and cloud computing, it gained an early lead over retailers like Walmart and tech titans like Microsoft. Since then, the company has invested aggressively to reinforce its competitive position.

For instance, Amazon has built an immense logistics network to strengthen its dominance in online retail. With its array of warehouses, planes, and trucks, the company can control shipping costs and the buyer experience. That infrastructure also enables Amazon to provide fulfillment services to third-party merchants, incentivizing sellers to join its platform and supercharging the flywheel effects that drive its business. Each new merchant creates incremental value for each buyer and vice versa.

Similarly, Amazon Web Services' (AWS) capacity for innovation has kept it at the forefront of the cloud industry. In fact, research company Gartner recently recognized AWS as the leader in cloud infrastructure and platform services, citing a greater ability to execute and a more complete vision than any rivals. Perhaps more telling, data from Okta (NASDAQ: OKTA) suggests that AWS has six times as many customers as the next-closest competitor, Microsoft Azure.

In the future, Amazon should thrive as e-commerce and cloud computing continue to gain traction. And with the stock trading at 2.3 times sales -- its cheapest valuation in five years -- now looks like a good time to buy and hold.

2. Nvidia

Like Amazon, Nvidia (NVDA 3.65%) has built a durable moat around its business. Its core innovation, the graphics processing unit (GPU), has become the gold standard for ultra-realistic visual effects in gaming and entertainment. It has also become the accelerator of choice for data-intensive applications. In fact, Nvidia holds over 90% market share in workstation graphics and supercomputer accelerators, and its technology powers more than 70% of the 500 fastest supercomputers in the world.

Over the last three years, Nvidia has delivered exceptional financial results, thanks to its dominance in the graphics and data center industries.

Data source: YCharts. Chart by author. TTM = trailing-12-months. CAGR = compound annual growth rate. EPS = earnings per share. Note: Nvidia's fiscal Q4 2022 ended Jan. 31, 2022.

To solidify its competitive edge, Nvidia has expanded its portfolio to include data center networking solutions and a number of subscription software products. The Omniverse platform is a suite of tools for 3D design and simulation. Using those tools, developers can build digital humans and render virtual worlds.

Similarly, AI Enterprise is a software suite for data science and artificial intelligence (AI). Those tools empower engineers to build, deploy, and manage AI applications across their IT ecosystems, and they address use cases like accelerated gene sequencing and drug discovery, autonomous cars and robotics, and smart cities and factories.

In the future, Nvidia should thrive as technologies like AI, scientific computing, and the metaverse continue to evolve. That's why this growth stock looks like a smart long-term investment, despite its somewhat pricey valuation of 16 times sales.

3. Vanguard S&P 500 ETF

While broad index funds are not stocks, per se, they can still be a smart place to put your money when the market is down. The Vanguard S&P 500 ETF (VOO 1.26%) is a perfect example. As a passively managed index fund, it features a low expense ratio of 0.03%, meaning you'll pay just $3 on a $10,000 portfolio. Better yet, it's designed to track the S&P 500. That means you benefit from instant diversification because you are effectively buying a small piece of 500 different businesses.

That last quality makes the Vanguard S&P 500 ETF the safest investment discussed in this article. Of course, low risk typically implies low reward, but this index could still make you richer in the long run. The S&P 500 has generated an annualized return of 7% over the last 60 years. At that pace, your money would double roughly once every decade.