3 No-Brainer Stocks to Buy in a Correction

The one thing you can count on in the stock market is volatility; there's no shortage of both ups and downs. Investors don't like the downs for obvious reasons, but they can sometimes be a necessary evil. They keep the stock market "honest" (if stock prices never declined, there wouldn't be any risk), and they present opportunities for investors to buy great companies trading at discounted levels.

With this latest stock market correction, many companies are at prices investors haven't seen in years. If you're looking for three no-brainers to buy in a correction, look no further.

1. Bank of America

Bank of America's (BAC -0.19%) stock plunged over 16% in March as part of a larger bank sell-off caused by panic over SVB Financial's Silicon Valley Bank failure. Yet, SVB's failure led to more business for BofA, with customers leaving smaller banks to join the banking giant.

BofA may face some short-term trouble as a looming recession could cause lending to slow and loan defaults to increase, but long-term investors shouldn't worry. The bank is built to withstand any economic conditions thrown its way, and recent panic has been misguided, in my opinion.

BofA is too engrained in the U.S. economy to go anywhere. It's truly "too big to fail." That doesn't automatically make it a great investment, but it gives investors a safety net not afforded to many other businesses. That shouldn't be needed, though. BofA is well-positioned to grow with economic expansion.

Banks may suffer from loan defaults and the like during bad economic times, but they flourish during economic expansions. We can't predict with full certainty when that'll be, but you can be certain it'll happen eventually.

In the meantime, investors can appreciate Bank of America's dividend at $0.22 per share and a trailing-12-month yield of 3.1%. That isn't necessarily a wow for a bank stock, but it's respectable nonetheless.

2. Alphabet

As the artificial intelligence (AI) race heats up, Google parent company Alphabet (GOOGL 1.68%) (GOOG 1.75%) is for sure facing one of its biggest threats in a long time. However, I believe many fears surrounding Alphabet have been overblown. Too many people are looking at AI as a zero-sum game instead of a growing pie that leaves room for many players.

Although Alphabet's stock is up over 20% year to date, it's not too late for investors to take advantage while the stock is seemingly undervalued.

Google's advertising business took a hit in Q4 2022, decreasing over 3%. But that was to be expected, considering many businesses cut back on ad spending last year. When Alphabet releases its Q1 2023 results later this month, I expect to see a similar trend, but the good news should come from Google Cloud.

Google Cloud is Alphabet's fastest-growing segment, increasing its Q4 revenue by 32% year over year to $7.3 billion. It still lags behind Amazon's AWS and Microsoft's Azure in market share, but it should continue to drive Alphabet's growth in the near future while it still figures out its AI playbook.

3. Snowflake

After an impressive post-IPO run, Snowflake (SNOW 1.04%) is now down over 60% from its November 2021 high, and down some 40% from its September 2020 IPO. Stock price aside, the company has been putting up impressive financials. In its 2023 fiscal year, Snowflake brought in $2.06 billion in revenue, up 69% year over year.

One thing investors should feel good about is the company's growing customer base -- especially the large customers, which are companies spending at least $1 million annually. Here's how Snowflake's large customers have stacked up over the past few quarters:

Data source: Snowflake FY23 Q4 presentation. 

That represents 79% year-over-year growth (total customers grew 31% year over year). More importantly, the company has a dollar-based net revenue retention rate of 158%, meaning customers are spending 58% more each year with the company. That's a recipe for longevity.

With the growing importance of data and data-intensive services like machine learning, Snowflake's data warehousing services are in as much demand as ever. Snowflake isn't undervalued per se, but it's hovering around levels where if you were looking to begin a long-term stake, now may be the time to begin.

Things may get worse before they get better with the stock price, but there should be full confidence in its long-term potential.