Zhitong Financial APP has learned that in many ways, this year is a year of making history. The unprecedented pandemic initially hit the US stock market and plunged it into chaos in the first quarter. The s & p 500 fell at least 30% in less than five weeks, falling into a bear market at its fastest pace in history.
After this historic slump, the S & P 500 recovered all its initial losses (and then some of them) in about five months of rebound. This marks the fastest rebound on record from the bottom of a bear market to a new high.
Now, history seems to be repeating itself. Of the eight bear markets since 1960, 13 have revised by 10% to 19.9% in three years. In other words, the bear market rally will not rise all the time. Each rebound inevitably leads to one or two major corrections.
The current revision is dominated by technology stocks. High-growth technology stocks led the rebound from the March 23 lows, but now the collapse of technology stocks is driving the market lower.
However, a fall in the stock market is not necessarily a bad thing. Historically, market adjustment has always represented an opportunity to buy high-quality shares at low prices. If the current technology stock crisis continues, investors can consider buying the following four stocks.
1. Amazon.Com Inc (AMZN.US)
As one of the world's largest listed companies, if Amazon.Com Inc's share price continues to fall, investors should consider buying. Analysts at Bank of America Merrill Lynch estimate that Amazon.Com Inc's seller ecosystem accounts for about 44 per cent of AOL sales. There is no doubt that retail will become Amazon.Com Inc's largest source of sales in the foreseeable future.
Amazon.Com Inc is more than just an online retailer with extremely low profit margins. Amazon.Com Inc also operates Amazon.Com Inc Network Services (AWS), a leading infrastructure cloud service. We have seen more and more enterprises turning to online / cloud business long before the pandemic broke out in 2019. The pandemic is just a shot in the arm for the growth of AWS.
AWS's sales rose 29% year-on-year in the quarter to the end of June. It is estimated that AWS's full-year sales are expected to exceed $43 billion. The profit margin of cloud services is much higher than that of retail or advertising, so the strong double-digit growth of AWS will drive Amazon.Com Inc's operating cash flow to soar over the next three or four years. If Wall Street were only valued at the median ratio of Amazon.Com Inc's share price to cash flow over the past 10 years, the company's share price would have reached $6000 by the end of 2023.
2.Fastly (FSLY.US)
Previously, the cloud stock led the market, but it has also been one of the worst-hit stocks recently. If technology stocks continue to weaken, Fastly, a marginal cloud computing service provider, is also worth buying.
The market demand for Fastly services is rising steadily. Before the pandemic, Fastly had grown at a lightning rate. During the pandemic, changes in the traditional office environment made online content and consumption more important.
In the most recent quarter, spending by the company's existing customers increased, while spending by new customers showed the strongest growth since the company's IPO. Attracting new customers is important for Fastly, but the most important factor driving operating margin growth right now is increased spending on its existing customer base, some of which are well-known companies.
To be sure, Fastly is not yet profitable. But as the company's business is moving in the right direction, Fastly deserves investors' attention.
3.Palo Alto (PANW.US)
If technology stocks continue to be hit hard, cyber security company Palo Alto could be the perfect choice for investors.
Of all the industries that are expected to achieve double-digit growth over the next decade, network security is probably the most secure. This is because hackers and robots will not stop attacking because the United States or the global economy is in trouble. Securing internal and cloud networks has evolved into a basic demand service that brings stable cash flow to enterprises, which is rare in high-growth technology companies.
Palo Alto's network security business will shift from physical firewall products to subscription services and cloud protection. The company will benefit from the business transformation, which may adversely affect its operating results in the short term, but will greatly enhance its profitability potential in the long run.
In addition, Palo Alto is actively expanding its portfolio of security solutions and reinforcing them through acquisitions. These spending should allow the company to maintain double-digit growth for years to come.
4.Facebook (FB.US)
Finally, if technology stocks continue to fall, investors should consider buying large amounts of shares in social media giant Facebook Inc.
The main reason for investing in Facebook Inc is that it is the most mainstream social media platform. As of the second quarter, Facebook Inc's monthly active users reached an astonishing 2.7 billion. If you include other sites such as Instagram and WhatsApp, that number will rise to 3.14 billion. Among the seven most visited social platforms, Facebook Inc, Facebook Inc Messenger, WhatsApp and Instagram account for four of them. Advertisers are unable to reach such a large target audience on other platforms, which provides Facebook Inc with incredible advertising pricing power.
Facebook Inc has not even fully unleashed his growth potential. Although Facebook Inc derives most of its revenue from advertising, it only generates advertising revenue from its flagship platforms Facebook Inc and Instagram. WhatsApp and Facebook Inc Messenger are not yet profitable.
Facebook Inc has the potential to expand other businesses. For example, payment tool Facebook Inc Pay and so on.