3 Powerhouse Stocks to Buy in March That Are Ready for Bull Runs

The U.S. stock market enjoyed a strong rally in January. However, those gains may soon fade away against the backdrop of last month's higher-than-expected inflation numbers and stronger-than-expected jobs report. Persistent inflation may result in the Federal Reserve increasing interest rates further than previously expected -- which creates less favorable conditions for stocks.

Although no one can predict with any certainty when stock market corrections will start or end, history shows that in the U.S., they are usually followed by strong bull rallies. Hence, in down markets, it can be smart to load up on shares of high-quality businesses that look poised for long-term growth, even if they face some near-term headwinds.

Here's why The Trade Desk (TTD -4.34%), Shopify (SHOP 0.23%), and Cadence Design Systems (CDNS -1.98%) could prove to be attractive picks in March.

The Trade Desk

An advertising technology stock may not seem to be the best choice to add to your portfolio when the economy is in the midst of a consumer spending slowdown. However, The Trade Desk -- a demand-side, programmatic advertising platform -- could be an exception. Although the company's Q4 revenue missed analysts' consensus estimate, its bottom line beat the forecast, highlighting the resilience of the business.

While walled gardens (closed ecosystems that limit access and sharing of technology and data) such as Meta Platforms' Facebook and Alphabet's Google also operate demand-side platforms, they also offer ad-supported content. Marketers may fear that these companies won't make optimal decisions for their advertising campaigns and will charge higher prices while monetizing their own ad space.

As the largest independent, third-party, demand-side programmatic ad platform in the world, The Trade Desk is seen to be transparent and objective about media platforms and pricing. The Trade Desk also focuses on leveraging data and technology tools to ensure the optimal use of marketers' budgets for targeted advertising.

The Trade Desk is also well-positioned to benefit from connected TV, which has emerged as its fastest-growing business. The video advertising category that includes connected TV accounted for a mid-40s percentage of the business.

The Trade Desk is also increasingly focusing on retail media (advertising on retailers' websites, applications, or in their stores), a market that Boston Consulting Group estimates will be worth $110 billion by 2026. The company has already partnered with 80% of the large retailers in the U.S. and several large ones in international markets.

Shopify

E-commerce infrastructure provider Shopify has definitely seen better days. Although the company managed to surpass analysts' expectations in Q4, its underwhelming outlook for 2023 has investors worried. However, the market's negativity seems exaggerated since the long-term growth story of this tech behemoth is intact.

In January, Shopify announced plans to increase the prices of its subscription plans by almost 33%. While this may affect customer acquisition in the short run, its large clients will most likely stick with Shopify since enterprise software is usually a sticky business. Changing providers involves significant switching costs (business disruption, training) and doesn't usually occur absent a significant price advantage. This, coupled with Shopify's focus on cutting costs by reducing its workforce, could boost its bottom line in the long run.

Shopify is not yet profitable, and this is definitely a concern for investors. However, with around 10% penetration in the U.S. e-commerce market and a growing international presence, it is well-positioned to withstand this difficult economic environment.

Cadence Design Systems

Cadence Design Systems provides electronic design automation software that is used to design and validate semiconductor chips, integrated circuits, and system-on-a-chip components used in complex and innovative electronic products. The software has applications in such areas as gaming, augmented reality, virtual reality, autonomous driving, hyperscale computing, artificial intelligence systems, and networking products. The software helps customers to improve the power consumption, performance, and reliability of their systems and electronic products while reducing time to market.

The success of the company's business model is evident in its recent financial performance. Despite the headwinds in the technology sector, its revenue jumped 19% to $3.56 billion in 2022. The company's generally accepted accounting principles (GAAP) operating margin grew by 400 basis points to 30%.

Cadence Design Systems is guiding for revenue growth of 12.4% to 14% and GAAP operating margins of 30.5% to 32% in 2023. The company expects to generate operating cash flow of $1.3 billion to $1.4 billion, half of which it says will be used for share repurchases.

Given Cadence Design Systems' solid business model, secular tailwinds, impressive financial performance, and robust outlook, I believe investors should open a small position in this stock.