What a difference a year can make.
In 2021, the stock market couldn't be stopped, with the benchmark S&P 500 enduring no worse than a 5% correction. But in 2022, growth stocks collapsed under the weight of rapidly rising interest rates and dragged all three major U.S. stock indexes into a bear market. The growth-focused Nasdaq Composite and Nasdaq 100 -- an index comprised of the 100 largest nonfinancial companies listed on the Nasdaq exchange -- were hit the hardest.
If there's a silver lining to the pain investors have endured since 2022 began, it's that time heals all wounds on Wall Street. More specifically, every bear market decline throughout history in the major indexes (which can also include the Nasdaq 100) has eventually been put into the rearview mirror by a bull market. It makes every big drop in the major indexes a buying opportunity for patient investors.
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With the Nasdaq 100 well off of its all-time high, bargains abound. What follows are three Nasdaq 100 stocks investors can confidently buy hand over fist in March.
Meta Platforms
The first Nasdaq 100 stock that stands out as a screaming buy in March is none other than social media giant and FAANG stock Meta Platforms (META 2.98%).
Meta was rocked in 2022 by two significant headwinds. To begin with, the U.S. economy showed signs of weakness as the Federal Reserve got aggressive with interest rate hikes. When the U.S. economy shows even the slightest hint of weakness, it's normal for advertisers to pare back their spending. Since Meta generated 97.5% of its revenue last year from ads, this was a difficult hurdle to overcome.
The other issue for the company formerly known as Facebook is CEO Mark Zuckerberg's desire to heavily invest in metaverse initiatives. Reality Labs, which is the division focused on virtual reality, augmented reality, and other metaverse ambitions, lost $13.7 billion last year and almost $24 billion over the past two years. Investors showed last year that they aren't willing to tolerate aggressive spending on initiatives that are years away from being significant revenue producers.
While these are tangible issues for Meta, they overlook three catalysts.
For one, advertising is cyclical but not proportionate. Although recessions are an inevitable part of the economic cycle, they usually don't last very long. Comparatively, economic expansions can go on for years, if not a decade. Ad-driven businesses like Meta disproportionately benefit from these extended periods of expansion.
Secondly, Meta's social media assets are still top-notch. During the fourth quarter, Facebook, WhatsApp, Instagram, and Facebook Messenger brought in 3.74 billion unique monthly active users. That's over half the world's adult population visiting a Meta-owned asset each month. Merchants wanting to reach as many consumers as possible are fully aware that Meta is their best chance to do so. This puts Meta in a position to capitalize on its superior ad-pricing power.
And third, Meta has the luxury of investing in its future. It ended 2022 with $40.7 billion in cash, cash equivalents, and marketable securities, compared to $9.9 billion in long-term debt. With abundant cash flow, Meta can spend for the future while still delivering in the present.
Sirius XM Holdings
The second Nasdaq 100 stock that can be bought hand over fist in March is satellite-radio provider Sirius XM Holdings (SIRI 0.96%).
Sirius XM has two decisive headwinds it's contending with. Like Meta, it's navigating an environment with weaker ad spending. Weak ad sales are a detriment to Pandora Media, which Sirius XM acquired in 2019.
The other concern is that a weaker U.S. economy could sink auto sales. The vast majority of Sirius XM's subscribers are listening to its channels in their cars, trucks, and SUVs. If fewer vehicles are being purchased with promotional subscriptions to Sirius XM, it could mean fewer new additions in the coming quarters.
While these short-term worries have taken quite the bite out of Sirius XM's share price, it's the company's sustainable competitive advantages that really have teeth.
There aren't too many legal monopolies in the U.S., but you're reading about one right now with Sirius XM. Although it does face some level of competition for listeners among terrestrial and online radio, there isn't another satellite-radio provider.
To somewhat build on this point, another benefit of Sirius XM's operating model is that portions of its cost structure are quite predictable. While talent acquisition and royalty expenses can ebb and flow from quarter to quarter, equipment and transmission expenses are relatively fixed. In other words, as Sirius XM adds new subscribers, most of that extra revenue can flow straight to its bottom line.
But what really helps Sirius XM stand out from the pack is its revenue mix. Most terrestrial and online radio operators rely on advertising to pay the bills. That's fine and dandy until a recession tanks the desire of merchants to spend on advertising. By comparison, Sirius XM generated only 20% of its roughly $9 billion in full-year sales from ads in 2022. The lion's share of its revenue (77%) comes from subscriptions, and subscribers are far less likely to walk away than advertisers during an economic contraction.
Following its recent beatdown, shares of Sirius XM can be had for less than 15 times Wall Street's forecast earnings for 2023. That's a fair price for a rock-solid business with a 2.2% yield.
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Vertex Pharmaceuticals
The third Nasdaq 100 stock that can confidently be bought hand over fist in March is biotech stock Vertex Pharmaceuticals (VRTX 1.25%).
Whereas Meta Platforms and Sirius XM have well-defined headwinds, Vertex's aren't nearly as clear. Arguably, its biggest issue is having all of its product revenue tied up in a single indication: cystic fibrosis (CF). CF is a genetic disease characterized by thick mucus production that can obstruct a patient's lungs and/or pancreas.
Although CF has no cure, there's obvious concern that if Vertex fails to diversify its portfolio beyond CF, its valuation could take a hit. Thankfully, this shouldn't be a big worry for current and prospective Vertex Pharmaceuticals investors.
Vertex is the kingpin when it comes to CF research, and no other drug developer is even close. It's developed four generations of mutation-specific CF therapies that have focused on improving lung function, and it's currently working on a fifth in clinical trials. The latest of these approved therapies is combination treatment Trikafta, which targets a mutation (F508del) found in approximately 90% of all CF patients. Trikafta was approved by the U.S. Food and Drug Administration five months ahead of its scheduled review date, and it's pacing more than $8 billion in annual run-rate sales.
The important thing to note about Vertex's ongoing CF research is that each generation of treatment it develops further protects its revenue stream from generic competition down the road. This company's cash flow is well protected for a long time to come.
However, Vertex Pharmaceuticals is investing in a number of indications beyond CF. This includes the development of exagamglogene autotemcel (exa-cel) in collaboration with CRISPR Therapeutics for the treatment of severe sickle cell disease and transfusion-dependent beta thalassemia, as well as novel therapy VX-548 for severe acute pain. Although not every experimental drug will be a winner, Vertex has a better track record than most biotech stocks of delivering successful late-stage clinical results.
Investors should also be aware that Vertex is rolling in the dough. It ended last year with $10.8 billion in cash, cash equivalents, and marketable securities. Having this much cash on hand will allow Vertex to execute share buybacks as well as potentially go shopping for therapies that can enhance or expand its existing pipeline.
