This has not been a banner year for Wall Street or the investing community. Since hitting their respective all-time closing highs during the first week of January, the widely followed Dow Jones Industrial Average and benchmark S&P 500 fell by as much as 19% and 24%.
It's been an even more challenging year for the growth-focused Nasdaq Composite and Nasdaq 100. The latter is an index of the 100 largest nonfinancial companies listed on the Nasdaq exchange. Both the Nasdaq Composite and Nasdaq 100 have lost close to a third of their value since hitting their respective record-closing highs.
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But where there's fear, there's almost always opportunity. For instance, every stock market correction and bear market throughout history has eventually been cleared away by a bull market. In other words, every notable decline in the broad-market indexes, including the Nasdaq 100, is an opportunity for patient investors to go shopping.
These three highly profitable and innovative Nasdaq 100 stocks are begging to be bought hand over fist in July.
Airbnb
The first Nasdaq 100 stock that can confidently be bought hand over fist by long-term investors in July is travel and hosting platform Airbnb (ABNB +1.36%).
Over the past two and a half years, Airbnb has been dealt two bad hands. The COVID-19 pandemic dramatically reduced global bookings for about two years, and now the growing prospect of a U.S. or global recession threatens to curb discretionary spending. As a result, Wall Street and investors haven't been as willing to pay a substantial premium for Airbnb's shares.
NASDAQ: ABNB
Key Data Points
However, this short-term pain shouldn't deter investors who are looking more than six months into the future. Airbnb has demonstrated that it has the platform and tools to disrupt the hotel and travel industries.
As an example, Airbnb completed 52 million bookings in 2016 and more than quintupled the number of nights booked by the end of 2019. With COVID-19 vaccination rates picking up and much of the world returning to some semblance of normality, Airbnb's 102.1 million nights and experiences booked in the first quarter of 2022 puts it on pace for more than 400 million bookings on an annual run-rate basis. Even with the pandemic ongoing, Airbnb effectively increased its bookings by a factor of eight (on a run-rate basis) in six years.
Perhaps even more intriguing is the fact that long-term stays -- defined as those of 28 or more days -- are its fastest-growing category. In a world where the number of mobile employees is rocketing higher, a platform like Airbnb is perfectly positioned to take advantage of workers who don't need to be tethered to a specific location.
The company's Experiences segment is yet another way it can infiltrate the $8 trillion travel industry. Airbnb has already partnered with local experts to lead travelers on adventures. My expectation is that future transportation-and-food-based partnerships could allow Airbnb to keep a larger percentage of what travelers spend.
NASDAQ: AVGO
Key Data Points
Broadcom
The second Nasdaq 100 stock that's begging to be bought in July is semiconductor chip solutions company Broadcom (AVGO 1.70%).
The prevailing concern here is that semiconductor stocks are cyclical. If the U.S. and global economy head into reverse, the expectation would be that Broadcom and its peers would see weaker demand, which can adversely impact their pricing power and profitability.
But while soaring interest rates and ongoing supply chain issues tied to the pandemic are tangible problems, neither is a particularly good reason to not buy shares of Broadcom at a 30% discount to its all-time high.
Through at least the midpoint of this decade, the 5G revolution can be a sustained needle-mover for Broadcom. It's been approximately a decade since telecom companies rolled out significant improvements to wireless download speeds. Upgrading to 5G-capable infrastructure should encourage businesses and consumers to replace their wireless devices. Since Broadcom generates most of its revenue from designing and manufacturing next-generation wireless chips and accessories found in smartphones, it should be perfectly positioned to thrive.
As I've discussed, Broadcom's growth potential in industries outside of smartphones is even more robust. This is a company that provides solutions used in technology-dependent next-gen automobiles, as well as produces connectivity and access chips critical to data centers. The latter is particularly important as businesses accelerate the pace by which they're shifting their data into the cloud in the wake of the COVID-19 pandemic.
But the glue that really holds Broadcom together is its record-breaking backlog. After ending 2021 with an all-time high of $14.9 billion in its backlog, Broadcom is better protected from economic downturns than most of its peers.
Considering that Broadcom shares can be purchased for just 12 times Wall Street's forecast earnings for 2023, and the company has grown its quarterly dividend by more than 5,700% since 2010, it makes for a screaming buy.
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Intuitive Surgical
The third and final Nasdaq 100 stock to confidently buy hand over fist in July is robotic-assisted surgical system designer and manufacturer Intuitive Surgical (ISRG 0.69%).
With the Nasdaq Composite and S&P 500 firmly in a bear market, the biggest headwind Intuitive Surgical is contending with is its premium valuation. As with Airbnb, investors' appetite for companies sporting premium price-to-earnings and price-to-sales multiples declines when uncertainty and volatility pick up.
However, running for the hills during short periods of weakness would be a regrettable move. That's because Intuitive Surgical brings sustainable competitive advantages to the table.
When the March quarter came to a close, Intuitive Surgical had installed 6,920 of its da Vinci surgical systems worldwide. Although this might sound like a small figure, it's night-and-day higher than the next-closest competitor. The lofty price for da Vinci surgical systems ($500,000 to $2.5 million), coupled with the training surgeons are given to use these systems, means hospitals and surgical centers tend to remain customers for a long time. In short, there's incredible safety in the company's operating cash flow.
NASDAQ: ISRG
Key Data Points
The other reason patient investors can appreciate Intuitive Surgical is the company's razor-and-blades operating model. The idea here is that you sell a customer a low-margin razor but generate high-margin recurring revenue from continuously reselling them the blades for the razor. In Intuitive Surgical's case, it gets customers "hooked" by selling or leasing them its da Vinci surgical system. As time passes and the number of installed systems increases, the instruments sold with each procedure, as well as system servicing, now comprise the bulk of the company's sales. These are considerably higher-margin revenue channels.
The company is also arguably still in the very early innings of its growth. There's an abundant runway for da Vinci to gain market share in thoracic, colorectal, and general soft-tissue surgical procedures. Between da Vinci and the company's other ongoing surgical innovations, Intuitive Surgical has the ability to maintain a double-digit growth rate for as far as the eye can see.
