As the economy stabilizes and the stock market shows signs of embarking on a sustained recovery, it is arguably the best time to look for stocks to buy. In particular, the best stocks to buy now are tech stocks, as they have historically performed much better than the broader market.
Many of these cyclical stocks currently provide excellent value in 2023, compared to defensive stocks, and a multitude of cyclical businesses have substantially reduced their labor costs. As a result, it is only a matter of time before falling commodity prices and a growing economy boost their earnings.
Of course, there are near-term risks facing tech stocks. But betting on well-established businesses already trading at discounts minimizes risk. Also worth noting is that staying out of the market because of a possible recession will only cause investors to miss out on some phenomenal entry points on many stocks.
I made that point in a column I wrote in Dec. pointing out in a subheading that, “Buying tech stocks at their trough will generate outsized returns when the market recovers.” These tech stocks subsequently soared a considerable amount, but I’m confident that these stocks will do even better in the long run.
With that in mind, let’s look at the following seven stocks to buy:
Although Tesla (NASDAQ:TSLA) has rebounded significantly from its earlier selloffs, there are more gains to be made in the name. I’ve pointed out in previous columns that Tesla is far from being “just another car company” due to its remarkable growth rate over the past few years. As long as it can sustain those growth levels, the company will continue to trade at a high premium to the market.
Moreover, the prices of important commodities such as lithium are declining, significantly cutting costs for Tesla. These lower costs should also help the company sell its electric vehicles at more competitive prices and add more middle-class customers.
In conclusion, Tesla’s growth story is not over despite its shares’ decline last quarter. Its competitors in the U.S. and Europe are growing much more slowly than it is, and its Chinese competitors are unlikely to ever take meaningful market share from Tesla in the U.S. and Europe. Tesla’s profit margins are also three times higher than BYD’s (OTCMKTS:BYDDF).
These factors combined should help Tesla retain its valuation premium to its competitors in the long term.
Meta Platforms (META)
Ever since Meta Platforms’ (NASDAQ:META) price-earnings ratio fell to ten, its valuation looked too good to pass up. I’ve pointed out in many of my past articles that Meta’s core business of Facebook, WhatsApp, Instagram, and Messenger, was excessively undervalued. Indeed, Wall Street had to backtrack its punishment on Meta as the company decreased its headcount and its spending on the metaverse.
META stock has doubled from its low, but I believe that the shares can climb further for a few reasons. First, Meta’s profits have been trending downward since 2022, while its top line has held relatively steady. The company’s layoffs and a recovery of the ad sector should positively impact its profits going forward.
Palantir (NYSE:PLTR) is a software company that provides data analytics and integration solutions to governments and private companies. In recent years, the company has become known for its work with the U.S. military and intelligence agencies. Its customers within the government have driven its growth and increased its visibility among investors.
Palantir’s partnership with the U.S. government will ensure that its revenue will not drop much, as government agencies are not willing to shift sensitive information away from such a trusted company. Furthermore, the company is also benefiting from the strong growth of artificial intelligence and cloud storage.
The firm’s past few quarterly reports weren’t that great. But I still have high hopes for Palantir in the long term due to accelerating demand for AI and cloud storage.
In Q3, the company ‘s revenue jumped 21% year-over-year, with its U.S. commercial revenue growing at a 53% YOY clip. The company seems well-positioned to benefit from the growing demand for data analytics and integration services in both the public and private sectors. Moreover, more favorable exchange rates also should boost PLTR’s top line.
The trend towards digitization and the shift towards cashless transactions is only expected to continue in the coming years. That should enable PayPal (NASDAQ:PYPL) to grow rapidly. With its strong brand, PayPal is well-positioned to benefit from the growth of the digital payments industry and provide the owners of PYPL stock with a solid return on investment over the next decade.
The burgeoning freelance market is the most significant catalyst that will drive PayPal over the next decade. Top freelance platforms such as Fiverr (NYSE:FVRR) and Upwork (NASDAQ:UPWK) allow their customers to obtain payments much more easily through apps like PayPal.
Younger Americans are also more likely to use digital apps instead of traditional banking methods, even if the apps charge higher fees. PYPL is already the go-to payment option for many vendors worldwide, and its newer applications, such as Venmo, are increasingly becoming popular. PayPal has also expanded into the crypto market.
These positive trends make me believe that PayPal is set to surge and is among the best stocks to buy for the next decade.
Spotify (NYSE:SPOT) is a music streaming company that had 124 premium subscribers before the coronavirus pandemic. Back then, the company reported annual revenue of about $7.6 billion, while it generated losses of around $230 million.
Now, conversely, its premium subscribers are approaching 200 million, and its revenue has nearly doubled. The company still reports losses, and its growth has slowed since the pandemic, but I believe the stock should be much higher than its current levels.
The company has retained the subscribers it obtained during the pandemic and expanded its subscriber base further while recruiting more customers overseas. Although it already has 195 million subscribers, it has more room for growth, especially once its ad revenue improves.
The company’s recent layoffs and more favorable currency exchange rates should also help lift this Sweden-based company’s earnings into positive territory in a few years.
Fiverr International (FVRR)
Fiverr International is an Israel-based company that will be among the top beneficiaries of the rapidly expanding freelance market. It is a platform that enables clients to find freelancers for almost any job and for as low as $5. Its business model is much better than that of its competitors, such as Upwork (NASDAQ:UPWK), where clients need to advertise for workers and whose freelancers have to apply for each opening.
For clients and freelancers, that is a time-consuming process compared to just examining freelancers’ profiles and reviews on Fiverr to find the best candidate.
Fiverr has remarkable customer retention, and the company continuously reinvests its cash in itself . Its financials also look solid, and its management focuses on growth while keeping losses tolerable.
Overall, Fiverr is among the least risky stocks to buy. It is up nearly 60% since I first wrote about it in October, and I think that it will continue to grow down the road.
Shopify (NYSE:SHOP) is one of the seven stocks to buy due to its impressive growth record and potential. With online shopping continuing to become more prevalent, the demand for Shopify’s services is only expected to grow.
Its financials and stock price have taken a hit after the coronavirus pandemic declined in severity. But I still see substantial long-term prospects for the stock, as e-commerce is still growing.
Shopify also reports solid financial results, featuring steady revenue growth and increasing profits. In its last reported quarter, its top-line growth accelerated to 21.5%, and its losses narrowed significantly.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.