Uncertainty is running high in the stock market right now. Inflation is hurting consumers, interest rates are about to tick higher, and geopolitical tensions in Europe are keeping investors on the sidelines.
That combination of factors has plunged the tech-centric Nasdaq 100 index into bear market territory, losing more than 20% of its value since November 2021. Many individual technology stocks have fallen even more sharply, and while it can be tempting to buy growth stocks at a discount, cheap doesn’t always equal good value.
Investors with a long-term time horizon should turn their focus to quality companies. Here are two worth considering, and one that should be avoided.
Why Microsoft is a buy
In a difficult market, it can be beneficial to seek safety in one of the world’s largest companies. Microsoft ( MSFT 3.87% ) has a $2.1 trillion valuation, and a multi-decade track record of outperforming the Nasdaq 100 index. The company has built a suite of diverse businesses, so when some segments struggle during tough economic times, others tend to pick up the slack.
Microsoft is best known for its software products, including the Windows operating system and Office 365, used by billions of customers globally, and that tends to be consistent across different economic environments. But the company also has a booming hardware business, consisting of the Xbox gaming console and Surface line of tablets and notebook computers. Both of these have become billion-dollar brands in their own right.
But an entirely different business is driving Microsoft’s growth at the moment. It’s the intelligent cloud segment, led by the Azure cloud services platform, which does everything from helping customers migrate to the cloud to providing complex artificial intelligence tools. It’s used by 95% of Fortune 500 companies, and the cloud segment generated $67 billion in revenue for Microsoft alone over the last 12 months, making up the lion’s share of its total sales.
Microsoft is also a highly profitable company, making it a great asset in a volatile market. Analysts expect it will deliver $9.35 in earnings per share in the current fiscal 2022 year, and with a current dividend yield of 0.87%, it will also return some of those profits to investors. That sets Microsoft apart from many other tech stocks.
Why Bill.com is a buy
When it comes to making long-term bets on the American economy, Bill.com Holdings ( BILL 1.75% ) should be a top candidate for investors. It serves small to mid-sized businesses through a growing portfolio of software products and it has generated staggering growth over the last few years.
The company’s flagship platform features a cloud-based digital inbox designed to help businesses aggregate invoices, to solve the often messy accounts payable workflow. Small enterprises can upload or receive invoices directly to their inbox, pay them with a single click, and thanks to integrations with core accounting software providers, Bill.com also books the transactions automatically.
But in 2021, the company expanded beyond its core offering through two key acquisitions. It purchased Divvy, a business budgeting and expense management software, and Invoice2go, an invoice generator to help with the accounts receivable process. Bill.com is now a very well-rounded service for businesses, and its popularity is soaring.
As of the recent fiscal 2022 second quarter, the company served over 373,000 business customers. And in that quarter, those customers generated $56 billion in transaction volume. Fees on those transactions is how Bill.com earns the majority of its revenue, and that revenue segment soared 313% year over year.
But Bill.com sees an enormous market opportunity on the horizon that includes…
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