The S&P 500 and the Nasdaq Composite have plunged into a bear market this year. That downturn was triggered by economic uncertainty. Runaway inflation and rising interest rates have scared some investors away from the stock market, but some of the wealthiest hedge fund managers on Wall Street have treated the downturn as a buying opportunity.

Since the beginning of the year, billionaire Ken Fisher of Fisher Asset Management more than doubled his stake in Zoom Video Communications (ZM -0.36%). Meanwhile, billionaire Louis Bacon of Moore Capital Management started a position in Paycom Software (PAYC -0.34%) in the second quarter, then more than doubled the size of that position in the third quarter.

For context, Zoom and Paycom have seen their share prices plunge 43% and 87%, respectively. Is it time to buy these growth stocks?

Zoom: Expanding beyond videoconferencing software

Zoom specializes in communications. Its cloud platform features products for video, phone, chat, and event management, as well as developer tools that enable third-party integrations. Collectively, those solutions simplify remote and hybrid work for customers, while eliminating the cost and complexity of managing the underlying hardware.

Its core product is Zoom Meetings, a videoconferencing application that became a sensation during the pandemic, making the Zoom brand synonymous with remote work. Today, Zoom leads the videoconferencing software market, according to G2 Grid, and that strong market presence has laid the foundation for its land-and-expand growth strategy. For instance, Zoom Phone reached 4 million seats in August 2022, up from 1 million in January 2021. 

Over the past year, Zoom increased its enterprise customer base 14%, and the average enterprise customer spent 17% more. But weakness in the online customer cohort continued to suppress overall growth. As a result, third-quarter revenue climbed just 5% to $1.1 billion, and non-GAAP earnings dropped 4% to $1.07 per share. But investors have good reason to believe that will change next year.

Zoom breaks its business into enterprise customers and online customers. The former are acquired by a direct sales team, while the latter provision software through self-service channels. Online customers grew like wildfire during the pandemic, but that cohort has also churned at a higher rate than enterprise customers. Fortunately, online customer churn returned to pre-pandemic levels in the most recent quarter, and management expects revenue from that cohort to stabilize in the middle of next year.

Additionally, Zoom puts its addressable market at $125 billion by 2026, and the company is well positioned to capitalize on that opportunity. Its broad software suite allows businesses to consolidate communications spend on a single, cohesive platform, and Zoom is successfully expanding beyond its videoconferencing roots with products like Zoom Phone, Zoom Rooms, and Zoom Contact Center.

The company has also introduced two artificial intelligence (AI) products this year. Zoom IQ for Sales leans on AI to analyze interactions in Zoom Meetings and surface insights that drive productivity for sales teams. Similarly, Zoom Virtual Agent leans on AI to automate customer service requests, reducing the burden on contact center agents. That type of innovation should keep Zoom on the cutting edge of communications.

Currently, shares trade at 5 times sales, the cheapest valuation since Zoom went public in 2019. That does indeed create a good buying opportunity for patient investors.

Paycom Software: Gaining share in human capital management (HCM) software

Paycom offers a broad suite of human capital management (HCM) software. Its platform consists of more than two dozen products, including tools for payroll, scheduling, and training, as well as human resources (HR) functions like benefits administration. Paycom makes it possible for businesses to manage the entire employee lifecycle -- from hiring through retirement -- from a single platform.

That broad utility gives the company an edge. Many businesses currently rely on a patchwork of software from different vendors to meet their HCM needs, but integrating disparate systems is often complex and costly. Paycom reduces that administrative burden with its comprehensive HCM suite, and that value proposition has consistently translated into strong financial results.

Third-quarter revenue increased 30% to $334 million, and the company reported a GAAP profit of $0.90 per share, up 73% from the prior year. More importantly, shareholders have good reason to believe that momentum will continue in the future. Paycom has just 5% market share, according to CEO Chad Richison, but the company is growing more quickly than rivals like Automatic Data Processing and Workday.

Better yet, Fast Company named Paycom one of the most innovative companies in the world this year. It earned that award for launching the industry's first self-service payroll software, nicknamed Beti (Better Employee Transaction Interface). That should give investors confidence in Paycom's ability to take market share in the coming years.

Currently, shares trade at 14.1 times sales, a discount to the three-year average of 22.1 times sales. Given Paycom's strong execution and large market opportunity, that is a reasonable price to pay for this growth stock, and investors should consider buying a few shares today.