With the latest market rout, focusing on Nasdaq stocks to buy with superior fundamentals has become even more important. True, heading into a firestorm isn’t the most comforting situation for investors. Nevertheless, if you take a direct approach, it’s better to improve your probabilities with fundamentally sound investments.
According to CNBC, the major equity averages just suffered the worst day since June 2020. The culprit? A hotter-than-expected key inflation report. Although August’s consumer price index only increased by 0.1% against the prior month, the context mattered. The rise in inflation occurred despite a drop in gasoline prices. Thus, investors really need to consider fundamentally strong Nasdaq stocks to buy.
Essentially, the Federal Reserve – which signaled higher interest rates to come – will now need to attack inflation more aggressively. The subsequent rise in borrowing costs will surely impact risk-on investments more acutely. Therefore, Nasdaq stocks to buy don’t look so hot. But it also means that investors should be picky, focusing on the most compelling ideas.
To help navigate the choppy waters and (hopefully) become profitable over the long run, here are Nasdaq stocks to buy with superior fundamentals.
In the years since its transformation – when the company finally started delivering products people cared about – Microsoft (NASDAQ:MSFT) evolved into an every-scenario investment. When in doubt, just pick up some shares of MSFT. This “strategy” has done well so far. Over the trailing five years, MSFT returned stakeholders nearly 235% of market value.
No, it’s certainly not the most exciting performance compared to other high-profile Nasdaq stocks to buy. Nevertheless, the point is even through hardships, Microsoft tends to right itself. With its vast business empire, it added to this resilience.
For instance, in terms of desktop operating systems, Microsoft Windows dominates proceedings with nearly 75% market share. Put another way, the business world runs on Microsoft.
What about the gaming sector? According to data from Statista, the company’s Xbox console commanded 53% of the underlying market share in 2021. MSFT isn’t going anywhere, easily making it one of the best Nasdaq stocks to buy.
During a market rout that may lead to longer-term bearishness, boring names should attract investors’ attention. No guarantee exists that less-than-exciting Nasdaq stocks to buy will flourish. However, flashy names tend to be distractions because they often need capital to keep their enterprises afloat. When borrowing costs rise, that’s a problem.
So, a boring but still incredibly relevant idea to consider is Cisco (NASDAQ:CSCO). An IT and networking specialist, Cisco represents a stalwart in the global business ecosystem. Admittedly, though, its share performance isn’t very encouraging. Down 30% on a year-to-date (YTD) basis, CSCO slipped a bit more than the underlying Nasdaq composite, which fell 26.5% YTD.
Nevertheless, as InvestorPlace contributor Will Ashworth pointed out, Cisco delivered better-than-expected results for its fiscal fourth quarter of 2022. The company beat on the top and bottom lines. More importantly, management delivered optimistic guidance for fiscal 2023, with revenue expected to grow by 5% at the midpoint of its prior forecast.
While it may be an obvious idea for Nasdaq stocks to buy, investors still ought to consider Apple (NASDAQ:AAPL). Personally, my concerns about the consumer tech giant zeroed in on sentiment for largely discretionary products. While I understand connectivity is critical these days, no one needs the absolute latest gizmo and gadget.
However, recent data demonstrates whether people suffer from inflation, reflation, deflation or whatever-flation, consumers will always flock to Apple. Preorders for the newest-generation iPhone 14 show the company still commands incredible social influence and cachet. Also, the tech giant performed very well for its premium Apple Watch Ultra.
Wedbush Securities’ Dan Ives and John Katsingris stated, “This speaks to the underlying demand story that Apple anticipates for this next iPhone release with our estimates that 240 million of 1 billion iPhone users worldwide have not upgraded their phones in over 3.5 years.”
Until contrasting fundamentals suggest otherwise, AAPL remains one of the best Nasdaq stocks to buy.
A giant in consumer staples, PepsiCo (NASDAQ:PEP) presents a less-orthodox idea among Nasdaq stocks to buy. But don’t get it wrong – PEP looks very attractive, especially under present circumstances. When you’re dealing with products that people need to have every day, like food and water, you enjoy a higher baseline.
Just look at PEP’s market performance. No, it’s not great under absolute terms. It’s not even in positive territory. But with the benchmark S&P 500 index down 18% — dangerously close to bear market territory – losing less than 3% for the year represents a victory. Heck, it would have closed out in the black had it not been for the Sept. 13 meltdown.
Fundamentally, PEP attracts investors seeking shelter from the storm because of its cynical nature. According to Wexner Medical Center at The Ohio State University, the sugar in sodas “causes dopamine releases in the brain, stimulating pleasure centers. For some, it’s not the ingredients that causes the addiction, but the lifestyle habit that leads you to the fridge.” Thus, PEP also benefits from a captive audience situation of sorts.
Kraft Heinz (KHC)
Another player among Nasdaq stocks to buy in the literal consumption business, Kraft Heinz (NASDAQ:KHC) specializes in packaged foods and condiments/sauces. Again, it’s not the most exciting name in the tech-centric exchange. Nevertheless, when the unpleasant material hits the proverbial fan, you’ll be glad to have KHC in your portfolio.
To be fair, KHC did take a hit during the Sept. 13 meltdown, suffering a 4.6% blow on the day. However, since the start of the year, KHC is only down 3%. Therefore, it just needs a bit of momentum to get the ship upright again. That’s more than can be said about other formerly popular Nasdaq stocks to buy.
Fundamentally, Kraft Heinz is better geared toward contemporary economic realities. During an inflationary cycle, investors enjoyed a motivation to do something, anything with their money. After all, their funds will diminish in value over time. During a deflationary cycle (i.e. higher borrowing costs), the opposite incentivization rings true.
Here’s why that’s important for Kraft Heinz: Unless you know a way for people to not eat and still live, the company will be in the running for those important grocery dollars.
Meta Platforms (META)
Heading into the riskiest section of Nasdaq stocks to buy with superior fundamentals, investors ought to consider Meta Platforms (NASDAQ:META). I don’t think anyone is going to tell you META is an easy investment to acquire. On a YTD basis, shares have plummeted 55%. It’s possible they can plunge more, which means the idea is more appropriate for risk-tolerant buyers.
As well, Meta CEO Mark Zuckerberg warned about a slowdown in the digital advertising space. Clearly, when you operate in the social media space, a decline in ad dollars hurts significantly. Also, the warning came amid its first-ever quarterly revenue decline. So, the headline numbers don’t support META as an optimistic trade.
But then, why mention it as one of the Nasdaq stocks to buy? Fundamentally, Meta owns the largest social media network in the world. However, it’s not just about raw numbers but also distribution. If you look at its age demographics, you’ll notice that while skewing young, the company enjoys a diverse mix of age cohorts.
In other words, if you’re going to advertise, you want to do so on the widest canvas possible.
Back in the early segment of the new normal, semiconductor specialist Nvidia (NASDAQ:NVDA) was flying. With pandemic-related restrictions keeping people at home, video game sales soared. Because Nvidia specializes in graphics processing units (GPUs) that power the latest tech in video games, NVDA stock benefitted handsomely.
Also, the cryptocurrency sector rang up the income for Nvidia. Here, the GPUs that gamers love also feature incredible utility for crypto-mining initiatives. As the digital assets sector went into beast mode, Nvidia churned out whatever products they could. Again, the company enjoyed downwind benefits.
Now, the circumstances have changed dramatically. With pandemic restrictions lifted, people prefer “real” experiences over digital ones. In addition, cryptos plunged badly from their peak valuations, leading to softness for NVDA.
Still, on a fundamental basis, Gurufocus labels Nvidia as “significantly undervalued.” Commanding excellent long-term growth and profitability metrics, NVDA may offer a once-in-a-blue-moon discount.
On the date of publication, Josh Enomoto 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.