It’s been a phenomenal year-and-a-half for investors in the US stock market. After plummeting about 30% when Covid-19 first spread around the world in March of 2020, the S&P 500 Index actually ended the year up 15.8%.
Yet long-term investors should be aware that stock market “corrections” of 10% or more in the US occurred (on average) once every two years between 2000-2019.
That means a sell-off – or crash – in the market shouldn’t be feared. Rather, it should be expected. When we think about it in that sense, the fall in stock prices actually presents compelling buying opportunities.
With that, here are two quality tech stocks to go all-in on when the next market crash comes along.
Cybersecurity is in huge demand right now. And for Crowdstrike Holdings Inc (NASDAQ: CRWD) that’s only good news, even if the stock market does crash.
With massive data breaches becoming more common, the demand for cybersecurity products for ALL businesses will only rise over time.
Crowdstrike’s unique cloud-native, end-point security platform allows businesses to utilise its flagship “Falcon” platform to prevent attacks on end-point devices such as desktop PCs, laptops, smartphones, and tablets.
Continuously improving through AI and machine learning, Crowdstrike’s Falcon platform actually analyses data on thwarted attacks and uses it to strengthen its defences.
The company has been a beast of a business, growing its top line revenue number at 86% year-on-year in its latest full-year 2020 earnings.
What’s more, Crowdstrike has built up a formidable customer base, ending its latest quarter with 11,420 subscription customers – up 82% year-on-year.
Source: Crowdstrike investor presentation June 2021
Many of these customers are large-scale enterprises that will end up spending more with Crowdstrike over time given the amount that needs to be committed to strengthening cybersecurity.
According to IDC, organisations should be spending between 5-10% of their IT budgets on security. In 2020, Crowdstrike estimated that cloud security spend’s share, as a total of cloud IT spend, was only 1.1%.
That means that a worldwide hybrid security cloud market that’s worth only US$1.2 billion today, could be worth over 10 times as much (at US$12.4 billion) if cloud security spending catches up to IDC’s recommended level.
Enterprise-level software platforms aren’t necessarily thought of as “sexy” for investors. But they’re crucial to the smooth functioning of medium and large businesses.
That’s where ServiceNow Inc (NYSE: NOW) comes in. Developing enterprise-level cloud computing solutions for companies, it competes with the likes of Europe-based SAP SE (NYSE: SAP).
Delivering a suite of solutions, from service operations and performance analytics in IT, to HR service delivery and Customer Service, ServiceNow is one of the top providers of cloud solutions that manage companies’ internal workflows.
Investors are probably unaware but it’s quietly become a US$110 billion market cap company, with its shares rising nearly 700% over the past five years.
ServiceNow’s latest quarterly earnings for Q1 2021 saw revenue hit US$1.29 billion, up 30% year-on-year on solid growth of subscription billings.
Its number of customers with an annual contract value (ACV) of US$1 million or more, grew to 1,146 – up from 932 in the same quarter in 2020.
Buy quality when prices fall
The beautiful thing about stock market crashes is that the proverbial “baby gets thrown out with the bathwater”. In other words, the stock prices of unbelievably well-run companies suffer.
Inevitably, that creates a dislocation in markets where investors can opportunely add to – or initiate positions in – companies that have solid businesses that will keep growing for the long term.
With Crowdstrike and ServiceNow, investors can be sure that their businesses will nearly certainly keep growing no matter what the stock markets happen to be doing.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Crowdstrike Holdings Inc.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.