The bear market has not hit all stocks equally. While energy stocks are down big from their highs, the group still remains the best performing in 2022. Conversely, growth stocks have been pummeled and the Nasdaq has taken a beating. While the weakness is discouraging, it has a few brave investors looking to buy the best Nasdaq stocks.
Some readers may consider that brave, but for others, they realize the difficulty that exists in buying stocks that have been severely beaten down. Even the best Nasdaq stocks have suffered large declines of roughly 30% or more. Some of the more less fortunate stocks have seen declines in excess of 50% or 60%.
That said, not all Nasdaq-listed stocks are tech companies and many investors seem to forget that. So in that light, let’s look at which one stick out as we kickoff the third quarter.
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| Ticker | Company | Recent Price |
| PANW | Palo Alto Networks | $513.13 |
| AMD | Advanced Micro Devices | $90.19 |
| AAPL | Apple | $154.96 |
| MSFT | Microsoft | $264.03 |
| PEP | PepsiCo | $168.02 |
| COST | Costco Wholesale | $525.36 |
| QCOM | Qualcomm | $154.19 |
Maybe it’s because of the selloff we’re seeing the broader market. Perhaps it’s because it’s not one of the big FAANG names or a chip favorite. However, I don’t think Palo Alto Networks (NASDAQ:PANW) gets enough credit.
The stock fought through the bear market pretty well at the beginning of the year. For the first several months of 2022, it was one of the few tech names that hadn’t been swallowed up. Why? Because there remains constant demand for its products as cybersecurity remains a growing concern by municipalities, companies, governments and citizens.
When the company most recently reported earnings, management said, “I’m less worried … right now given what’s going on in the environment … you’re seeing way more security awareness and concern more than I’ve ever seen.”
Analysts call for almost 30% revenue growth this year, then 20%-plus growth in each of the next three years.
Advanced Micro Devices (NASDAQ:AMD) has enjoyed a modest rebound lately, but it has been absolutely crushed so far in 2022. In the fourth quarter of 2021, it was one of the few growth stocks hitting new all-time highs. But its reckoning came right off the bat in January and shares are now down 40% year-to-date.
I don’t know if that’s fair, though.
The company continues to report solid results, while analysts’ earnings and revenue expectations continue to increase at a time where the stock price is decreasing. When that occurs, we get a lower valuation, which is exactly what we’re seeing with AMD stock right now.
Shares trade at a reasonable 19 times this year’s earnings. When we consider the company’s growth and its acquisition of Xilinx (with great free-cash flow), that looks downright cheap. The company has proven to be a long-term winner and with the selloff, it’s looking more and more like a long-term opportunity.
Further, with the recent report from Taiwan Semiconductor (NYSE:TSM), we know that the semiconductor stocks are not in a state of free-fall.
With its $2.4 trillion market capitalization, Apple (NASDAQ:AAPL) is the biggest name in the Nasdaq and the entire stock market. As such, it’s no surprise that it’s included on the list of the best Nasdaq stocks to buy.
However, there’s more to it than the simple argument that “Apple is big.”
The company boasts a monumental balance sheet and immense cash flow. Each year, management makes it a point to raise its dividend — although it’s still modest at a 0.65% yield — and approve another round of buybacks. This year, Apple gave the green light to a $70 billion share repurchase program.
That’s good for roughly 3% of the outstanding shares, but more importantly, that breaks down to about $280 million worth of stock per day (assuming Apple were to buy the same amount of stock each trading day of the year). That’s a really nice bid to have in your stock.
In any regard, the company is the best-performing FAANG stock so far this year. That alone is worth some recognition.
Speaking of FAANG, did you know that Microsoft (NASDAQ:MSFT) — which is not in the FAANG group despite being the second-largest company in the U.S. — also bests this group at something?
While Meta Platforms (NASDAQ:META) may have superior gross margins, not one component tops Microsoft in profit margin. Yep, not even Apple.
Microsoft is generating operating margins of 42.5%. To no surprise given its gross margin profile, Meta comes in second, with 36.7% margin. At 30.5%, Apple is roughly 1,200 basis points behind Microsoft. That’s not a knock on Apple or any other FAANG component. But it’s a big compliment toward Microsoft.
Lastly, Microsoft still has growth. Analysts expect 18.5% revenue growth in 2022 and 14% growth in 2023. As for earnings, the company is forecast to grow its bottom line by 15.5% in each of the next two years.
When investors think of the best Nasdaq stocks, they tend to think of technology stocks. But that’s not always the case, with PepsiCo (NASDAQ:PEP) being one example. With its $250 billion market cap, PepsiCo may be dwarfed by the Apple’s and Microsoft’s of the index, but it’s big enough to be a top-15 holding in the index.
At a time where the market has been volatile, Nasdaq investors can use stocks like PepsiCo to help stabilize the ship. The company pays out an attractive yield of 2.7%, while the dividend was recently increased in May by 7%. It was the company’s 50th straight year with a dividend increase.
It’s not just the dividend that PepsiCo is consistent with. The company is forecast to grow its earnings to $6.63 a share in 2022, up 6% from last year. That’s followed by almost 10% growth forecasts for 2023.
Like PepsiCo, Costco Wholesale (NASDAQ:COST) is not the quintessential Nasdaq stock. It’s certainly not what comes to mind when investors think of the best Nasdaq stocks to buy. Presently, the company gets a lot of coverage for the low price of its hotdog-and-soda combo — $1.50 — while inflation is scorching higher, but Costco is much more than that.
In the U.S., there are a handful of retailers that are not only surviving, but actually thriving despite disruptions from e-commerce. Thankfully for long-time investors, Costco is thriving.
Case in point? Consensus expectations call for 15.5% revenue growth this year and almost 10% growth next year. As for earnings, analysts expect roughly 18% earnings growth this year and 11% growth in 2023. Throw in Costco’s one downfall, which is that it trades at almost 40 times earnings, and by the numbers we have a pretty normal-looking Nasdaq stock.
Joking aside, Costco is a great operator that tends to almost always trade at an elevated valuation.
Looking to end our list of best Nasdaq stocks with a tech company, we have Qualcomm (NASDAQ:QCOM). Even before its recent stroke of good fortune, Qualcomm was setting up with a low valuation and solid growth.
Its downfall is that the company’s contract with Apple was supposed to taper off, as the latter worked on its own 5G modem chip. However, Apple is reportedly having trouble with its own chip and will again rely on Qualcomm to fill the gap that year. It will apparently be the sole provider for the chip as well.
The company is forecast to grow its revenue 33% this year and its earnings to grow 50%. However, estimates for 2023 are now likely conservative due the Apple news. By the time Apple does produce its own chip, it’s expected that Qualcomm will have added enough business to offset the loss of Apple.
While the stock has enjoyed a solid rally lately, shares still trade at just 14 times earnings.
On the date of publication, Bret Kenwell 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.
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