Economic headwinds in 2022 led to a sell-off where many of the world's most valuable companies watched their stocks plunge. While uncertainty often causes investors to panic sell, the better option is usually to buy and hold stocks in companies with substantial market shares in high-growth industries. Picking up market-leading stocks in a downturn can massively pay off over the long term once temporary hurdles subside.
Amazon (AMZN -1.65%), Apple (AAPL 0.52%), and Advanced Micro Devices (AMD 1.33%) are excellent investment options amid a sell-off. These companies hold dominant positions in their respective industries and give investors a chance to back high-profit sectors such as cloud computing, e-commerce, consumer tech, semiconductors, and more.
Here are three stocks you can confidently buy after a market downturn.
1. Amazon
Last year's sell-off caused Amazon's stock to fall nearly 50%, driven mainly by multiple hits to its e-commerce business. In 2023, unresolved economic challenges continued to hurt the company, with its North America and international segments reporting a combined $2.8 billion in operating losses in the first quarter. Amazon's cloud service, Amazon Web Services (AWS), has managed to keep the company profitable through it all. However, easing inflation could substantially benefit both businesses over the long term.
Steep rises in the cost of living caused reduced spending from consumers and businesses, which has depleted profits in Amazon's e-commerce segments and slowed growth for AWS. However, inflation eased for the ninth consecutive month in March, with prices rising 5%, down from 6% in February and 9.1% in June 2022. The improvement will likely allow consumers to gradually spend more freely, with businesses increasing their budgets for cloud services like AWS.
Analysts seem to agree about the company's potential, as Amazon's 12-month price target of $138 projects stock growth of 30%. Meanwhile, 46 out of 53 analysts give the stock a buy/strong buy rating.
Amazon shares may have tumbled alongside the market, buts its dip could offer substantial gains in the long term.
2. Apple
While Amazon dominates the cloud and e-commerce markets, Apple is leading the way in consumer tech and digital services. The tech giant holds leading market shares in multiple industries, including smartphones, smart watches, headphones, and tablets. With Apple's authority in these markets, its stock climbed 315% over the last five years despite the recent sell-off.
In fact, as seen in the chart below, Apple proved its resiliency amid a downturn last year by being one of the few stocks to outperform the market among some of the biggest names in tech.
Data by YCharts
The iPhone maker's consistent gains over the years made it one of the most reliable stocks to own. As a result, any decline in the market usually signifies a buying opportunity for Apple stock.
The company's earnings are scheduled for release on May 4, with some analysts expecting the company to report a year-over-year decline in revenue. Apple's Q1 2023 (ending Dec. 30, 2022) revealed a revenue decline in three out of four of its product segments as consumers pulled back on discretionary spending. The trend is expected to continue into Q2 2023, which could trigger a sell-off for Apple's stock.
However, the company is unlikely to be down for long. Its market dominance and growth history make it a no-brainer investment after a downturn.
3. Advanced Micro Devices
As a leading chipmaker, AMD likely has a long and fruitful future. Its hardware is crucial to the development of countless industries, which makes it a compelling stock during a market tumble.
The company's chips power data centers worldwide that host cloud giants like Microsoft's Azure and Alphabet's Google Cloud. Meanwhile, it is the exclusive supplier of processing/graphics chips for Sony's PlayStation 5, Microsoft's Xbox Series X|S game consoles, and countless other devices. AMD's powerful chips have led it to partner with behemoths of the tech market, diversifying its business and strengthening earnings over the long term.
AMD's stock plummeted 55% in 2022, suffering from reduced spending in the PC market. However, in the the last year its business blossomed by pivoting to less consumer-reliant segments such as data centers and embedded products. The change potentially set the company on a growth path that will see it flourish long into the future as these technologies continue to develop and increase in demand, profiting from burgeoning markets like artificial intelligence.
AMD's forward price/earnings-to-growth ratio decreased 83% over the last year and currently sits at an attractive 0.1. The figure suggests the company's projected growth is not priced into its stock, making it a bargain buy. With its solid position in multiple booming markets, AMD is a stock you can buy with confidence after a sell-off.
