There are many reasons to think the U.S. economy will fall into a recession this year. Federal Reserve chairman Jay Powell has indicated interest rates are going to rise until inflation is sufficiently under control, the Institute of Supply Management's Manufacturing Purchasing Managers Index points to economic contraction, and arguably the biggest indicator a recession is on the horizon is that Berkshire Hathaway (BRK.A -0.31%) (BRK.B -0.45%) is sitting on a growing pile of cash. Warren Buffett and his managers have amassed $128 billion they are not deploying, suggesting they may see a big downturn on the horizon.
None of these reasons should cause you to pull your money out of the market, though. J.P. Morgan Asset Management found that over the past 20 years a $10,000 investment in the S&P 500 would have grown to $64,844 by remaining fully invested throughout all of the market's dips and crashes, including through the financial markets collapse of the mid-2000s.
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Missing just the 10 best days of the market would have dramatically slashed your investment to just $29,708, and remarkably six of the seven best days occurred immediately after the worst ones. March 12, 2020 was the second-worst day for the stock market of that pandemic-ruined year. March 13, however, turned out to be the best day of the year.
Staying fully invested and keeping your eyes open for opportunities to buy good companies to hold for the long haul is a key ingredient in generating substantial wealth. The following pair of tech stocks are ones you should consider buying right now.
Alphabet
In times of turmoil, seek out quality and stability. Alphabet (GOOG -1.36%) (GOOGL -1.37%), the parent of search king Google, provides that for investors. Even as overall revenue growth slowed to 6% in 2022 as advertising budgets were scaled back, Alphabet is able to offset some of the impact from such developments because it has diversified businesses.
Cloud service revenue soared 32% in the fourth quarter to $7.3 billion, though search revenue still dwarfs it at $42.6 billion. The ad marketing isn't going away, though, and Alphabet remains one of the top go-to destinations to reach consumers. YouTube also remains a force to be reckoned with in the streaming world, as well as Android in mobile, Chrome in operating systems, and Gmail -- well, it's pretty much the default email for most people.
That's a large, well-fortified castle i'ts defending, so despite challenges on the periphery, Alphabet is still a leading tech giant. The stock is down 30% over the past year because of the assaults on its varied revenue streams, but it now trades at 20 times earnings, 15 times next year's estimates, and 20 times the $60 billion in free cash flow it's generated. Those are some of its lowest levels over the past decade.
The market may think the search king is in danger of being dethroned, but you shouldn't write off Alphabet's ability to bounce back, particularly at this low valuation.
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The Trade Desk
Because of the concentration in ad spending underway, The Trade Desk (TTD -1.67%) is flourishing as it benefits from customers wanting to get more bang for their targeted ad-buying buck.
The Trade Desk's programmatic ad-buying system allows brands to collect better data on potential buyers in real time and ensure ads are placed appropriately without needing to rely upon third-party cookies.
In the wake of Google Chrome announcing it will retire its use of third-party cookies next year, The Trade Desk gives advertisers tools to still reach audiences, such as its recently unveiled audience-matching product called Galileo. Both Walt Disney and Paramount Global have signed up to use The Trade Desk's Unified ID 2.0 framework.
Connected TV especially looks like a prime opportunity for continued growth because advertisers like the ability to easily compare performance of campaigns versus platforms like Meta Plaforms' Facebook, which is much more opaque. The consumer shift away from traditional TV to streaming media and video on demand continues to accelerate and will further drive The Trade Desk's business.
Even as The Trade Desk's stock is down 30% from recent highs, it still carries a seemingly lofty valuation, going for 42 times next year's earnings and 18 times sales. But it is still in the wheelhouse of its growth cycle, and those metrics are at the lower end of its historical valuations, making now a good time to buy.
