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2 Stocks to Buy if the Market Crashes in 2022

2 Stocks to Buy if the Market Crashes in 2022
Written by publishing team

Growth investors have experienced significant market volatility in recent months, and the macroeconomic environment suggests that things could get worse before they get better. The omicron variant of the coronavirus threatens to wreak havoc on global supply chains, while the Federal Reserve is expected to raise interest rates three times this year to curb rampant inflation. Likewise, bond yields are creeping higher, tempting many investors to move wealth into safe haven assets.

Collectively, these headwinds have translated into turmoil — and any time there’s a market turmoil, people start to worry about a market crash. Unfortunately, no one knows the future, so it is impossible to know when the next big downturn will occur. But I know the past, and every previous market crash was a buying opportunity.

For this reason, I keep a small cash position in my wallet. This way I have capital that I can use whenever the next downturn begins. And now, Amazon (NASDAQ: AMZN) And Salesforce.com (NYSE: CRM) At the top of the list of watchers. Here’s why.

Image source: Getty Images.

1. Amazon

The Amazon brand has become synonymous with e-commerce, and for good reason. Its online market receives approximately 5.2 billion visits per month, three times that of its next closest competitor. In terms of US e-commerce sales, Amazon is expected to gain 41% of the market share in 2021, while taking second place. Walmart You’ll take 6.6%, according to eMarketer.

Even more impressively, Amazon has established a strong competitive position in two other high-growth industries. Amazon Web Services is the world’s most popular cloud service provider, capturing 32% of the market share in the third quarter, while taking second place Microsoft He got 21%. Similarly, Amazon ranks third in the US digital advertising market, and the company is expected to gain 11.6% of the market share this year. But eMarketer forecasts put that number at 14.6% by 2023.

Simply put, Amazon has achieved a level of success that all businesses aspire to but few people ever realize. This translated into strong earnings growth.

Measure

Q3 2018

Q3 2021

compound annual growth rate

Revenue (TTM)

$221.0 billion

$458.0 billion

28%

Source: YCharts. TTM = 12 months plus. CAGR = compound annual growth rate.

In 1997, founder Jeff Bezos wrote his first letter to shareholders, highlighting the company’s intent to “acquire customers.” More than two decades later, Amazon is still using the same rules of the game. It has invested billions to build an extensive fulfillment and logistics network, helping the company control costs, simplify shipping for sellers, and provide a great experience for buyers.

As a warning, during a recent earnings call, CEO Andy Gacy noted that Amazon’s fulfillment network has nearly doubled in size since the pandemic began, and that these investments have severely impacted the bottom line. In fact, Amazon has generated negative free cash flow of $2.3 billion over the past 12 months. Management said expenses could rise in the near term as the company continues to grow its freight business.

However, this short-term pain should be a long-term tailwind, enhancing Amazon’s value for buyers and sellers. Additionally, cloud computing and digital advertising are high-margin businesses, especially when compared to retail. As Amazon continues to grow within those industries, the company must become increasingly profitable.

2. Salesforce

Salesforce specializes in Customer Relationship Management (CRM) services. Its portfolio includes a suite of software tools for sales, customer service, marketing and commerce, helping organizations provide a first-class customer experience across every department. The platform also includes tools for artificial intelligence, automation, and analytics, all of which boost employee productivity. As a whole, Salesforce helps its customers build and maintain long-term relationships with their customers.

Since its founding in 1999, Salesforce has leveraged its position as its number one driver to a significant competitive advantage. The company currently ranks number one with a market share of 23.9% in the CRM and research firm industry Gartner Salesforce has been recognized as a leader in sales force automation and multi-channel marketing. Not surprisingly, these awards come along with strong demand and impressive financial performance.

Today, Salesforce serves more than 150,000 customers, and the company has rapidly developed its top slate over the past three years.

Measure

Q3 2019

Q3 2022

compound annual growth rate

Revenue (TTM)

12.5 billion dollars

$25.0 billion

26%

Source: YCharts. TTM = 12 months plus. CAGR = compound annual growth rate. Note: Third Quarter 2022 ending October 31, 2021.

Over the same time period, free cash flow grew more quickly, rising 115% — or 29% year over year — indicating that the company has become more profitable over time. This bodes well for shareholders.

Looking ahead, Salesforce expects its market opportunity to reach $248 billion by 2025, leaving plenty of room for growth. To this end, Salesforce completely dominates the CRM industry, a fact that should drive demand in the coming years as more organizations implement digital transformation initiatives. That’s why this stock seems like a smart long-term investment, especially if its price drops due to a market crash.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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