The recent correction in the stock market is making many investors uneasy. Amid several days of considerable sell-offs, shareholders are likely questioning past investments, and others may ask themselves whether they want to stay in the stock market at all. dfdf ,
Nonetheless, many top tech stocks offer track records of success that far surpass downturns and economic cycles, meaning shareholders will more than likely serve themselves best by staying invested. Knowing that, three Fool.com contributors have ideas about where tech investors can turn for stability and long-term returns: Netflix (NFLX +0.16%), Spotify Technology (SPOT +0.05%), and the VanEck Semiconductor ETF (SMH +0.40%).
Netflix is one big technology stock that investors can have confidence in
Justin Pope (Netflix): Volatility has cranked higher in the stock market. Investors are dealing with the most uncertainty they've seen since, arguably, the COVID-19 pandemic five years ago. The Trump administration recently announced widespread tariff policies, and it's still unclear whether they will stick, to what degree, or what the economic impact may be. U.S. consumers are shaken, with the sentiment index at lows seen only occasionally since the 1950s.
To be clear, this is no time to panic. Change can be scary, but the odds are good that this will prove to be noise years from now. Over its long history, the United States and the stock market have overcome various policy changes, recessions, and crises. This is the time when long-term investors should buy high-quality stocks.
NASDAQ: NFLX
Key Data Points
Admittedly, the short-term outlook is hazy at best. Investors should look to companies poised to thrive in all economic scenarios. Netflix jumps off the page here. Netflix is the world's leading streaming company, with over 301 million paying subscribers worldwide. If consumers close their wallets, that will mean fewer vacations and big-ticket purchases. However, that could also translate to more time at home watching TV. Netflix would be a natural winner here, or at the very least, the business should hold up well since it's a top streaming priority for many households.
Meanwhile, the financials are pretty. The company's profit margins continually improved as its revenue grows faster than its content production spending, and the growth story isn't over. Netflix's subscriber base grew an impressive 15.9% year over year in Q4 2024. Over the long term, analysts estimate that Netflix will grow earnings by an average of 24% annually. Netflix's current price-to-earnings ratio of 46 is reasonable for that growth, making the stock a solid buy today. Further declines would only enhance the buying opportunity. Netflix is a proven winner, and that shouldn't change.
Spotify stock could offer a safe harbor for growth investors
Jake Lerch (Spotify Technology): Everyone knows it's been an iffy year for the stock market. As of this writing, the major indices, meaning the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average, are down 8%, 14%, and 5%, respectively.
While that isn't great news for the investment community, there are some silver linings to this otherwise grey cloud. For example, outperforming stocks stand out all the more given the weak performance of the market. One of those outperforming stocks is Spotify Technology. Here's why it's a great stock to steady any portfolio right now.
NYSE: SPOT
Key Data Points
First of all, Spotify boasts excellent fundamentals. As of the company's most recent earnings report (for the three months ending on Dec. 31, 2024), Spotify generated 4.2 billion euros ($4.67 billion) in revenue, 1.4 billion euros in gross profit, and 0.9 billion euros in free cash flow. Those figures were up 16%, 40%, and 122% year over year.
The engine powering this impressive growth is the company's streaming platform, which continues to draw in new users and convert them to premium paid subscribers. In its most recent quarter, Spotify's revenue from its premium memberships grew by 17% year over year, as the company increased prices but still grew its overall premium subscriber base by 11%. This demonstrates that Spotify has pricing power and can raise prices (thus widening its margins) without reducing its customer base.
With so much uncertainty in the market -- and in the technology sector in particular -- Spotify stock looks like a safe harbor. Indeed, as of this writing, shares have advanced by 25% year to date, despite the tough spring for major indices.
Investors looking for a growth stock that offers some relief from the heartburn plaguing the stock market may want to consider Spotify thanks to its booming fundamentals and its solid business model.
This fund offers stability despite investing in a cyclical industry
Will Healy (VanEck Semiconductor ETF): When seeking to steady your portfolio, purchasing an exchange-traded fund (ETF) that invests in a basket of stocks can offer you reassurance while keeping you invested.
However, the choice of the VanEck Semiconductor ETF may still come as a surprise to some. The chip industry has a reputation for cyclicality, and indeed, even the strongest semiconductor stocks can experience significant sell-offs during down periods.
NASDAQ: SMH
Key Data Points
Fortunately, most chip stocks do not give up all bull market gains in a subsequent bear market. That allowed the VanEck ETF to earn considerable returns since its inception in 2011. Over the last 10 years, the VanEck ETF had an average annual return of almost 25%, nearly double the performance of the SPDR S&P 500 ETF Trust over the same period.
The fund has accomplished this by investing in 25 top chip stocks, with its largest position in Nvidia. Thanks largely to Nvidia's lead in the AI accelerator market, the stock's growth resulted in it making up just under 20% of the fund's holdings.
Second in position size is Taiwan Semiconductor Manufacturing at 11% of the fund, and Broadcom makes up just under 8%. The remaining 22 holdings are positions constituting 5% or less of the portfolio. That portion includes companies such as Qualcomm, Advanced Micro Devices, and Texas Instruments. The VanEck ETF charges an ETF expense ratio of 0.35%, or $35 in annual management fees for every $10,000 invested.
Admittedly, market downturns can make some investors hesitant to put money to work. Fortunately, funds like the VanEck ETF offer proven track records of success amid downturns. Given its positions in high-quality stocks, past returns, and a reasonable expense ratio, this fund can serve as a source of profits and stability no matter the performance of the overall market.
