Nasdaq Bear Market: 3 Stocks I'd Buy With No Hesitation

The Nasdaq and growth tech stocks generally have endured a brutal bear market. This performance has dampened both expectations and stock prices as investors brace for slowdowns.

However, many growth stocks have succeeded in minimizing slowdowns or avoiding them altogether. To this end, stocks like MercadoLibre (MELI -1.01%), Alphabet (GOOGL -1.23%) (GOOG -1.10%), and Tractor Supply (TSCO 2.20%) should remain on investor watchlists.

MercadoLibre

E-commerce stocks have experienced declining growth across the board, but one would not know it by observing MercadoLibre's performance. Despite macroeconomic challenges, its total payment volume exceeded $30 billion in Q2 for the first time in company history.

However, MercadoLibre has built much of its success on its e-commerce support segments. For example, Latin America is primarily a cash-based society. Hence, solutions from its Mercado Pago segment help unbanked customers conduct e-commerce. Moreover, its Mercado Envios segment helps sellers store, pack, and ship goods in its largest markets.

Such varied offerings boosted its bull versus bear case, helping revenue grow to over $4.8 billion in the first half of 2022, 57% more than the same period in 2021. The company also earned a net income of $188 million, a 452% increase year over year as slower growth in the cost of revenue offset rapid increases in operating expenses.

MercadoLibre does not publish guidance, but analysts forecast 46% income growth for the year, indicating revenue growth should remain significant even as it slows. And even after bouncing off June lows, it sells at about half its 52-week high. The company's price-to-sales (P/S) ratio of around six is greater than either Amazon or Sea Limited (at three and four, respectively). Still, with MercadoLibre avoiding the significant revenue declines of its peers, it might be worth that higher valuation.

Alphabet

Admittedly, current conditions may dampen the appeal of Alphabet. First, online advertising suffered as consumers resumed more offline activities following the end of lockdowns. And that industry may suffer further amid two consecutive quarters of economic growth.

However, Alphabet holds more than $140 billion in cash reserves. Over the years, it's used some of its generous cash flows to diversify into dozens of other businesses, including Waymo and Verily Life Sciences. However, one of the few non-ad segments for which it publishes the results is Google Cloud. That cloud segment grew revenue by more than 39% year over year in the first half of 2022, to about $12.1 billion.

That cloud performance contributed significantly to overall revenue for the first two quarters, which reached $138 billion. This amounted to a 17% increase over that time frame. However, net income dropped by 11% to just over $32 billion during this period. Rising costs and disappearing equity gains led to the reduced earnings.

Despite shrinking income, the Google parent's performance has nearly matched the S&P 500. And its 22 price-to-earnings (P/E) ratio makes it far cheaper than Microsoft or Amazon, with earnings multiples of 29 and 125, respectively. That low valuation, along with its solid balance sheet and numerous investments, makes this pullback less likely to last.

Tractor Supply

Amid the rising remote working trend, Americans have increasingly left the cities to move to suburbs and rural areas. This likely places them in the market area of Tractor Supply, which operates more than 2,000 stores in 49 states.

These locations primarily serve so-called "hobby ranchers," who engage in amateur farming. Its target market also includes horse owners, suburban homeowners, contractors, and tradespeople. Additionally, the company owns Petsense, a pet specialty supplier with 178 locations.  

Such trends helped revenue grow to more than $6.9 billion, 8% more than in the same period in 2021. Net income came in at $584 million, rising 6% over the same time frame. A rising cost of merchandise sold and higher income tax expenses slightly reduced its margins.

Nonetheless, analysts raised 2022 revenue estimates to $14 billion at the midpoint, taking annual revenue growth to 10%. This should help boost the company -- and it has already outperformed the S&P 500 over the last year.

Additionally, the 21 P/E ratio for the retail stock is only just slightly above the 20 earnings multiple of Home Depot, which competes in Tractor Supply's suburban markets. As changing work trends make a rural lifestyle more feasible, more customers and investors will likely turn to this retailer.