Red-hot inflation sent the S&P 500 tumbling into a bear market last year, and the benchmark index is still down 15%. Rising interest rates factored heavily into that decline. To cool the overheated economy, the Federal Reserve raised its benchmark rate at its fastest pace in four decades. But the tightening cycle might end soon -- the latest projections from Fed officials imply one more quarter-point hike this year -- and that could be the catalyst that triggers the next bull market.
Historically, the S&P 500 performs well after tightening cycles. In fact, the index produced an average return of 17.8% in the 12 months following tightening cycles over the last four decades, according to FactSet. But even if the next bull market fails to materialize this year, investors can rest assured that a rally is coming. Every past bear market has always ended in a new bull market.
In the meantime, CrowdStrike (CRWD -0.71%) and The Trade Desk (TTD -0.99%) are worth buying in April.
1. CrowdStrike
CrowdStrike is a cybersecurity software vendor with a penchant for innovation. It was among the first companies to apply artificial intelligence (AI) to cybersecurity, and it invented a new method for threat detection known as indicators of attack (IoAs). Other vendors rely on indicators of compromise (IoCs), the forensic equivalent of broken glass at a crime scene. IoCs are reactive signals that indicate an attack occurred, but IoAs are proactive signals that indicate an attack could occur.
CrowdStrike also brought new products to market quickly. Its Falcon platform includes 23 software modules today, up from 10 modules when it went public in 2019, and all of them are delivered through a single software agent that can be installed without a device reboot, a quality that management believes is unique to CrowdStrike. That advantage, coupled with its superior threat-detection capabilities, propelled the company to the forefront of several cybersecurity verticals, including endpoint device security, cloud-native application protection, and threat intelligence.
CrowdStrike reported strong financial results last year. Revenue soared 54% to $2.2 billion, and cash from operations climbed 64% to $941 million. Yet the company hardly scratched the surface of its estimated $76 billion addressable market, and management believes that figure will approach $100 billion by 2025.
CrowdStrike recently expanded its go-to-market strategy by partnering with Dell Technologies, a PC maker that serves 96% of the Fortune 500. Dell will offer CrowdStrike subscription software to its customers, and it will use Falcon to provide managed security services to clients.
Meanwhile, CrowdStrike also launched a new module (i.e., External Attack Surface Management) that helps businesses close security gaps in their internet-exposed assets. That new module is particularly timely because research company Gartner says attack surface expansion is one of the most pressing problems for security teams today.
Currently, shares trade at 14 times sales, a bargain compared to the three-year average of 35.2 times sales. That's why investors should buy a small position in this monster growth stock in April.
2. The Trade Desk
The Trade Desk operates a demand-side platform (DSP) for advertising. Its software automates the ad-buying process and helps marketers plan, measure, and optimize data-driven campaigns across various media formats, including mobile apps, desktop display, and online video. The Trade Desk faces tough competition from industry leaders like Alphabet and Meta Platforms, but the company has a competitive edge built on transparency and superior technology.
Specifically, The Trade Desk is the largest independent DSP. Its independence -- meaning it doesn't own any web content, so it has no reason to favor specific ad inventory -- eliminates the conflict of interest inherent to Alphabet and Meta Platforms. Both of those tech giants have an incentive to push advertisers toward their own inventory (i.e., Google Search, Facebook) whether or not that inventory will yield the best campaign results.
Additionally, The Trade Desk believes it has the industry's most advanced data marketplace and a superior AI engine. That is somewhat subjective, but brands are certainly more willing to share data with a company like The Trade Desk as opposed to Alphabet and Meta Platforms, simply because The Trade Desk doesn't compete with its customers.
Ad spending in the U.S. has declined every month since July 2022. Many brands have cut their ad budgets to compensate for softening consumer demand brought on by high inflation. But The Trade Desk still reported solid financial results last year. Revenue rose 32% to $1.6 billion, and cash from operations climbed 45% to $549 million. That performance is especially impressive in context: Alphabet reported ad revenue growth of just 7% last year, and Meta Platforms actually saw ad revenue drop by 1%.
Looking ahead, The Trade Desk is well positioned to maintain its momentum. Its transparent business model is clearly resonating with advertisers, and Grand View Research estimates that adtech revenue will increase at 14% annually through 2030. With that in mind, shares currently trade at 18.9 times sales, a discount to the three-year average of 30.4 times sales. Investors should take that opportunity to buy a small position in this growth stock.
