2 Unstoppable Growth Stocks to Buy If There’s a Stock Market Sale | The motley fool

The major market indices have all reached their highest levels of the year. But it’s always a good idea to have a list of stocks that you wouldn’t hesitate to buy if they suddenly went on sale.

Historically, a market selloff of 10% or more from the previous high occurs about once every two years. of Nasdaq Composite experienced a slight correction almost a year ago, so investors should prepare for the possibility of another decline in the next year or so.

One indicator that continues to weigh on the near-term outlook for markets is the inverted yield curve — the yield on shorter-dated Treasuries is higher than the yield on longer-dated Treasuries. This condition has preceded almost every recession over the past 50 years – and the yield curve has inverted since July 2022.

Market declines make many investors nervous, but the longer you invest, the more you see these dips as opportunities to buy your favorite companies at lower valuations, setting the stage for better returns when the market recovers .

With that in mind, here are two quality stocks that investors shouldn’t hesitate to buy in the upcoming market sell-off.

1. Apple

Apple (AAPL 2.86%) is one of the most popular brands in the world. It has an installed base of 2.2 billion active devices. Combined with its cash-rich balance sheet and $101 billion in free cash flow from its product sales, it’s an unstoppable business that would be worth buying on the decline.

The stock has soared this week after the company held its Worldwide Developers Conference, where it unveiled Apple Intelligence — a set of new artificial intelligence (AI) features coming to iOS 18 that could kick-start a bullish cycle. upgrade for iPhone.

Slowing growth in iPhone sales over the past year caused the stock to trade mostly lower during the first half of the year. The stock price is currently up just 11% year-to-date and has lagged behind the Nasdaq’s 17% rise, but Apple’s growth has historically revolved around releasing new devices with hardware improvements and other features. Apple Intelligence could be an incentive for users with older devices to upgrade, as it will bring some conveniences to iPhone users, including the ability to summarize documents and the integration of OpenAI’s ChatGPT into Siri.

While Apple Intelligence will be a free feature included in iOS 18, it won’t work on older devices using previous-generation processors. It will require the A17 Pro chip found in the iPhone 15 Pro and iPhone 15 Pro Max. It will also work on iPads and Macs with the M1 chip and later versions. These AI capabilities require higher processing power, but offering them is also a great strategy for Apple to increase sales of its premium devices and increase its profits, which will benefit shareholders.

Apple stock trades at a premium price-to-earnings (P/E) ratio of about 31. If Apple sees strong demand for its newest devices when iOS 18 is released this fall, its revenue growth could accelerate , justifying that premium. Either way, Apple should be high on your shopping list in the next market sell-off.

2. Microsoft

Microsoft (MSFT 1.94%) transformed over the past decade from a company dependent on a slow-growing PC market to a fast-growing cloud services provider. It’s not easy for large companies to change strategies amid changing competitive landscapes, but Microsoft has shown the ability to quickly adapt to emerging opportunities — a telltale sign of an unstoppable company.

The stock has performed well recently, supported by solid growth across the business. Microsoft is well positioned to take advantage of the latest revolution in technology as it introduces new AI-powered features to its consumer and enterprise products.

The company’s software and subscription-based services generate massive amounts of high-margin revenue, which is helping it fund its heavy spending on cloud computing infrastructure to meet growing demand for AI services. Microsoft’s revenue rose 17% year over year last quarter, driven by balanced growth in Office software and enterprise cloud services.

Microsoft is monetizing AI in a variety of products and services. It now offers AI features in Office, Windows apps and the GitHub coding platform. Its Copilot AI assistant is now used by nearly 60% of the Fortune 500. Revenue from the productivity and business processes segment, which includes Office and Microsoft 365 subscriptions, grew at a healthy 12% year over year in the last quarter.

Microsoft is strengthening its leadership in software and becoming the face of AI for the millions of users who rely on its software every day. The stock is expensive at the current P/E of 36, but would be worth buying at a lower valuation during a market downturn.