Whether you're an experienced investor with decades of stock-picking expertise or a brand-new participant in the market, 2022 has been a tough year. The S&P 500 index is down by 16% year-to-date. That's one of the sharpest market drops in decades, exceeded only by truly historic events: the Black Monday crash of 1987, the popping of the dot-com bubble in 2001 and 2002, and the 2008 subprime mortgage meltdown.
Large-scale market downturns like this one cantake down great stocks just as far and fast as lower-quality names. The difference is that robust businesses can weather these storms and deliver market-beating gains. But, at the same time, the same correction will be the final straw that breaks struggling companies of lower quality.
The two tech titans below have what they need to survive and thrive for decades to come. At the same time, they have fallen between 36% and 51% below the all-time high prices they reached last November. With stock prices hovering just below $100 per share, these proven winners may never be this affordable again.
If you don't already own these household names, this would be a great time to get started. If you do, it's never too late to gain more exposure to market-beating stocks at attractive prices.
NASDAQ: AMZN
Key Data Points
Amazon: $93 per share, down 45% in 2022
You know all about Amazon (AMZN +5.43%), of course.
The e-commerce giant has probably drowned your neighborhood in packages since the coronavirus crisis got everyone used to online ordering of everyday goods. Those Amazon-branded delivery trucks are on every street corner, all the time. And when you go online for any reason, the Amazon Web Services (AWS) cloud-computing platform powers many of the sites, services, apps, and businesses you'll find in cyberspace.
Wall Street is acting as if Amazon's golden days are over. Investors have been spooked by restricted consumer spending due to galloping inflation, driving share prices lower and lower. The stock took a 24% haircut in April, started to climb back in the early summer, and then plunged back down again. Amazon's stock price now stands 35% below the recent peak in mid-August.
But the inflation-powered downturn is not the end of e-commerce as we know it. Cloud computing is also here to stay for the long haul. In both cases, some traders hit a temporary speed bump and jump to the conclusion that the wheels are falling off.
There is always light at the end of the macroeconomic tunnel. The sun follows each rainstorm and rises at the end of even the darkest night. Likewise, the rising inflation will eventually slow down to a reasonable level and reset the global economy.
Meanwhile, Amazon's market-leading stature in cloud computing and online shopping isn't going away. The company still has the growth-focused mindset of a hungry start-up, paired with some of the deepest pockets around. Amazon can roll with the punches and come back swinging.
I expect Amazon's stock to make a full recovery when the economic crisis abates -- and then it will get back to expanding its global footprint, its collection of products and services, and the stock's market value.
NASDAQ: GOOGL
Key Data Points
Alphabet: $98 per share, down 32.7% in 2022
Google parent Alphabet (GOOG +0.52%) (GOOGL +0.37%) is a chameleon. The business you see today, with a heavy focus on online ad sales and the Android mobile ecosystem, won't be relevant forever. But when the next sea change rolls in, Alphabet is designed to turn on a dime and find another way to make lots of money.
In fact, that flexibility os the whole reason why we're talking about Alphabet here, and not Google Incorporated. The business was reorganized under the Alphabet umbrella in order to simplify reaching into new markets where the Google name doesn't carry any automatic advantages.
So far, the most promising alternative revenue stream comes from the Google Cloud platform. This operation still carries the Google name but does not depend on ad-based revenue streams. So while Google's advertising business posted year-over-year revenue growth of just 2.6% amid an inflation-powered slowdown in digital ad spending in the recently reported third quarter, Google Cloud reported strong demand and a 38% sales jump.
Other ideas will eventually follow; they just take a while to mature. Alphabet is exploring potentially game-changing ideas in fields as diverse as medical science, self-driving cars, high-speed internet access services, and venture capitalism. Many of these experiments will never deliver meaningful contributions to Alphabet's top and bottom lines, but the company is pursuing too many powerful ideas to come up empty.
Developing a handful of true winners among many ideas should be good enough. It's OK to lose a few bets -- or most of them, even. Baseball legends like Ty Cobb and Babe Ruth struck out in nearly two-thirds of their at-bats.
That flexible-by-design business model makes Alphabet a buy for all seasons. But Wall Street has shrugged off that larger ambition and preferred to focus on the short-term effects of reduced ad spending instead. Alphabet's two stock classes are down by roughly 33% in 2022, and they trade at just 20 times trailing earnings. That's the lowest P/E ratio Alphabet's stock has seen in a decade.
Alphabet built these stocks for longevity, and that's a powerful wealth-building tool. You should take full advantage of short-sighted discounts like this one.
