The stock market has seen an incredible run, with the S&P 500 (SNPINDEX: ^ GSPC) up 93% from its low in March 2020. Prior to that, it was largely on an unbroken upward path for more than a decade.
What this shows is that despite troughs and even deep valleys, stocks tend to resume their upward trajectory relatively quickly. And the time that we experience these declines is much shorter than the bull markets that follow.
History tends to repeat itself
After China’s largest real estate developer Evergrande rocked the market on the brink of defaulting on loans, many thought we might be on the verge of seeing the market plunge again, or even sink into a recession. global.
No one can predict when such an event will occur, but investors should be prepared for it to happen at all times. But the two tech stocks below represent companies investors should be prepared to buy in a recession.
The Evergrande episode shows how fragile last year’s economic recovery has been. While the US stock indexes have recovered all the lost ground, most China-based stocks cannot say the same. Internet search giant Baidu (NASDAQ: BIDU) is a prime example, as his stocks are still down 3.5% the week following the fear caused by Evergrande.
Beijing is cracking down on tech-driven companies, a consequence of the government’s desire to limit the free flow of information. Baidu stock is down 28% year-to-date and 56% below its 52-week high due to the closer scrutiny China is giving to certain segments of its economy.
Despite the threat, Baidu himself has not been examined under a microscope, and there is no indication that he will be. He scrupulously follows Beijing’s orders, and indeed takes advantage of the limits that have been imposed on competition. Its biggest rival, Google, is not even allowed to participate in the Chinese search market, but Baidu is valued as if its business will never grow further.
As much as I am reluctant to recommend Chinese stocks based on the inherent risks associated with mercurial government policy, Baidu has a dominant market share, making it the preferred destination for advertisers. Year-to-date online marketing revenue grew 22% year-over-year, while online advertising services revenue jumped 18% from a year ago.
Due to its reach, Baidu will remain the leading internet search service in China, and its stock looks cheap now. If a recession were to hit, it would become even more so.
Last month, a hacker stole data from over 50 million T Mobile customers. A few weeks ago Apple released an emergency software patch after a security hole was discovered that allowed hackers to covertly install spyware on Apple devices without the user’s knowledge. Suffice it to say with so much data being transferred and stored in the cloud, cybersecurity is one of the biggest concerns for businesses – and why Crowdstrike Holdings (NASDAQ: CRWD) will thrive, regardless of market conditions.
Using sophisticated machine learning, artificial intelligence and behavioral analytics to detect and counteract cybersecurity risks, Crowdstrike’s Falcon platform manages billions of events every week while providing customers with personalization solutions. and cost-effective customization.
Falcon becomes smarter over time, allowing it to recognize and respond to potential threats faster. The results resonate with its more than 13,000 customers, 98% of whom renew their subscription with the cybersecurity specialist. Annual recurring revenue jumped 70% in the last quarter to $ 1.3 billion. Customers who have four or more modules experience growth of 30% or more, which helps increase gross margins to 76%.
If the economy falls into a recession, Crowdstrike Holdings becomes an easy stock to buy.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.