Stock Market Sell-Off: 3 Fastest-Growing Stocks to Buy and Hold in May (and Beyond)

A market crash is a sudden and dramatic price drop in a broad stock index, usually by at least 20%. The description is open to some interpretation, but many investors would argue that we have crossed that threshold. heavy growth Nasdaq Composite is down 28% from its peak, and the widest S&P 500 has fallen by 17%. What should you do?

It never feels good to lose money, but it is the price of admission if you want to participate in the stock market. Over the past six decades, the S&P 500 has fallen 10% or more on 31 separate occasions. That’s about once every 1.9 years. However, excluding the current situation, the losses from each of those market declines were subsequently erased by a bull run. Put another way, now is probably a good time to put money into the market.

Here are three high-growth stocks you may want to consider buying in May and holding as the market returns to its recovery.

Image source: Getty Images.

1. Amazon

Companies with a lasting competitive advantage often make large long-term investments, especially when competing in growth industries. Amazon (AMZN 0.32%) check both boxes. It has positioned itself as a leader in e-commerce and cloud computing, with both markets expected to grow at double-digit rates for (at least) the next few years.

Rising costs have put pressure on Amazon’s financial performance in recent quarters, but the company has still grown steadily over the last three years.

Metric

Q1 2019

Q1 2022

CAGR

Income (TTM)

$241.5 billion

$477.8 billion

26%

EPS (TTM)

$23.95

$41.43

twenty%

Data source: YCharts. Table by author. TTM = last 12 months. CAGR = compound annual growth rate. EPS = earnings per share.

To some extent, Amazon’s success can be attributed to its pioneering status. As a pioneer in both e-commerce and cloud computing, it gained an early advantage over retailers like walmart and tech titans like Microsoft. Since then, the company has invested aggressively to strengthen its competitive position.

For example, Amazon has built a huge logistics network to strengthen its dominance in online retail. With its variety of warehouses, planes, and trucks, the company can control shipping costs and the shopper experience. That infrastructure also allows Amazon to provide fulfillment services to third-party merchants, incentivizing sellers to join its platform and powering the flywheel effects that drive your business. Each new merchant creates incremental value for each buyer and vice versa.

Similarly, Amazon Web Services (AWS)’s ability to innovate has kept it at the forefront of the cloud industry. In fact, the research company Gartner recently recognized AWS as a leader in cloud infrastructure and platform services, citing greater ability to execute and more comprehensive vision than any rival. Perhaps more revealing, data from okta (NASDAQ:OKTA) suggests that AWS has six times as many customers as the next closest competitor, Microsoft Azure.

Going forward, Amazon should prosper as e-commerce and cloud computing continue to gain traction. And with shares trading at 2.3 times sales, their lowest valuation in five years, now seems like a good time to buy and hold.

2.Nvidia

like amazon, nvidia (NVDA -3.19%) he has built a lasting moat around his business. Its main innovation, the graphics processing unit (GPU), has become the gold standard for ultra-realistic visuals in games and entertainment. It has also become the accelerator of choice for data-intensive applications. In fact, Nvidia has more than 90% market share in workstation graphics and supercomputer accelerators, and its technology powers more than 70% of the world’s 500 fastest supercomputers.

Over the last three years, Nvidia has delivered exceptional financial results, thanks to its dominance in the graphics and data center industries.

Metric

Q4 2019

Q4 2022

CAGR

Income (TTM)

$11.7 billion

$26.9 billion

32%

EPS (TTM)

$1.66

$3.85

32%

Data source: YCharts. Table by author. TTM = last 12 months. CAGR = compound annual growth rate. EPS = earnings per share. Note: Nvidia’s fiscal 2022 fourth quarter ended January 31, 2022.

To solidify its competitive advantage, Nvidia has expanded its portfolio to include data center networking solutions and a number of subscription software products. The Omniverse platform is a set of tools for 3D design and simulation. Using those tools, developers can build digital humans and render virtual worlds.

Similarly, AI Enterprise is a software suite for data science and artificial intelligence (AI). Those tools enable engineers to build, deploy, and manage AI applications across their IT ecosystems, addressing use cases such as accelerated gene sequencing and drug discovery, self-driving cars and robotics, and smart cities and factories.

Going forward, Nvidia should thrive as technologies like AI, scientific computing, and the metaverse continue to evolve. That’s why this growth stock looks like a smart long-term investment, despite its somewhat expensive valuation of 16 times sales.

3. Vanguard S&P 500 ETF

While broad index funds aren’t stocks, per se, they can still be a smart place to put your money when the market is down. The Vanguard S&P 500 ETF (VOO -0.70%) is a perfect example. As a passively managed index fund, it features a low expense ratio of 0.03%, which means you’ll pay just $3 on a $10,000 portfolio. Better yet, it’s designed to track the S&P 500. That means you benefit from instant diversification because you’re buying a small part of 500 different businesses.

That last quality makes the Vanguard S&P 500 ETF the safest investment discussed in this article. Of course, low risk generally means low reward, but this ratio could still make you richer in the long run. The S&P 500 has generated an annualized return of 7% over the last 60 years. At that rate, your money would double about once every decade.

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