The growth-centric Nasdaq Composite index delivered a 500% return between 2011 and 2021. The sell-off this year has given back a third of those gains. But while a bear market is never fun to live through, it often provides incredible buying opportunities.
The safest way to invest in a bear market is to stick with large, established companies that provide essential services to consumers and businesses. Investors who buy an equal amount of the following stocks should earn great returns over the next 20 years.
Airbnb is enjoying strong momentum
Spending on hotels and cruises has not fully recovered back to pre-pandemic levels, but that makes Airbnb's (ABNB 0.98%) recent results even more impressive. The rental platform reported $17 billion in gross booking value in the second quarter -- 73% higher than the same quarter in 2019. Airbnb was gaining share in global travel before the pandemic, and its outperformance in 2022 bodes well for long-term growth.
There are a few advantages working in Airbnb's favor. For one, it offers unique places to stay that travelers can't access through hotels. The company claims to have nearly every type of space you can imagine in almost every location around the world. If you've ever dreamed of living in a fairy-tale house shaped like a giant boot, you'll find it on Airbnb.
Another dynamic that solidifies Airbnb's competitive moat is a two-sided marketplace of renters and hosts. There are 4 million hosts on the platform that are drawn to the large customer pool and ability to turn their property into extra income. This is a powerful incentive that helps Airbnb attract hosts to handle spikes in demand in certain geographies. Its adaptable supply of listings is a key advantage over the big hotel companies.
Airbnb has grown from the founder's apartment in 2007 to a business that generated $47 billion in gross bookings in 2021. With a long-term addressable market of $3.4 trillion, and a stock trading at a more reasonable price-to-sales multiple than it did a few years ago, Airbnb offers market-beating return potential over the next 20 years.
Expectations are too low for this top e-commerce stock
With nearly half a trillion dollars in annual revenue, Amazon (AMZN -1.42%) might seem too large to deliver more returns. The 7% increase in net sales last quarter lends credence to that notion. But Amazon will likely reaccelerate sales back to double-digit growth rates soon enough. The tech titan's annual revenue is still peanuts compared to the $6.98 trillion value of the U.S. retail market, not to mention the massive opportunity in cloud computing at Amazon Web Services.
Market traders have sent the stock down 32% this year over slowing growth. Meanwhile, Amazon is clearly a more valuable business today than it was three years ago. This is evident in its second-quarter sales, which were nearly double the level of sales in the same quarter of 2019. Clearly, more customers and organizations are depending on Amazon more than ever.
Amazon continues to introduce new ways of generating revenue, including expanding into advertising, grocery, gaming, streaming, and even Amazon Care (virtual pharmacy). The company is widening its competitive moat and giving more than 200 million Prime members every reason to never leave their home to buy anything.
Amazon has historically turned its growing capital expenditures in new fulfillment centers into more revenue and free cash flow, which grows the value of the business and pushes the stock higher. With the stock trading at its cheapest price relative to sales in over five years, you don't want to miss the opportunity to buy shares during the market sell-off.
Costco is more relevant today than ever before
Costco Wholesale (COST 1.04%) is one of those stocks that gives you a warm and cozy feeling to own. It's a bonus that it just happens to be a financially rewarding stock to build your nest egg. The stock has delivered a 13-fold return over the last 20 years.
Costco's strategy is not rocket science. It buys in bulk to deliver big savings to the consumer, while keeping costs extremely low. Most of its razor-thin profit margin comes from membership fees.
Costco's warehouse stores are more relevant in today's economy. Comparable sales growth accelerated during the pandemic, and the recent sky-high inflation is pushing more shoppers to seek value. Coming off a strong fiscal fourth quarter, in which comp sales grew at a robust 13.7% year-over-year, September comp sales still look strong at 8.5%.
Shareholders should be happy to own the stock 20 years from now. While Costco shares still trade at a premium to the market average price-to-earnings (P/E) multiple, it's also never been cheap. While I wouldn't pay an extremely high valuation to buy shares, the current P/E of about 32 is a good enough to start a small position. Costco deserves a premium for its consistency, culture, and future opportunities to expand in e-commerce and international markets.
