The 2 Best Stocks to Buy Now That the Market Is in Correction Territory

With the stock market down more than 10% from its all-time high (the threshold marking a correction), investors should be examining stocks to buy at a discount. Since 1950, the market has seen 36 corrections, or one every two years. With the drop averaging 13.6%, these buying opportunities don't come around too often.

Since general market sentiment has been dragging unaffected stocks down, investors can search in the bargain bin for successful businesses that have been sold off indiscriminately. Two stocks I believe fit this description are Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Airbnb (NASDAQ: ABNB). With both stocks recently reporting great 2021 results and giving solid 2022 guidance, purchasing these two stocks could be a great investment decision.

Image source: Getty Images.

1. Alphabet

The parent company of many dominant services, such as the Google search engine and YouTube, Alphabet's products are used by billions of people around the globe. It also has growing divisions like Google Cloud and Waymo, the self-driving car project. Excluding Waymo (as the industry is too young to have market share data), Alphabet has a solid market share in these areas, as the chart shows.

Data source: Statista and Datanyze. Industry ranking in parenthesis.

Much of Alphabet's revenue is derived from advertisement spending, which took a dive during 2020. During 2020, full-year revenue only grew 13% to $182 billion, whereas 2021's revenue rocketed up 41% to $258 billion. Also, 2021's net income grew even faster than revenue, with profits increasing 89% to $76 billion. With extra cash on hand, Alphabet can return some of it to shareholders in the form of stock repurchases. In 2021 alone, Alphabet repurchased $50 billion of its shares or about 3% of its $1.75 trillion market cap.

Alphabet's price-to-earnings (P/E) ratio has reached a level not seen since the March 2020 pandemic lows, as seen here.

GOOG PE Ratio data by YCharts

Alphabet deserved to be sold off two years ago because advertisement spending falls during difficult economic times. This year is a different story, as consumers are willing to travel and spend again, so market sentiment should be positive, not negative.

At 24 times earnings, Alphabet is cheaper than consumer staples stocks like Coca-Cola (26 P/E) and Costco (43 P/E). Alphabet's growth prospects are much greater than other staples stocks, so the P/E disparity will only increase throughout the year as the denominator in the ratio will rapidly increase.

In my opinion, there really isn't a greater value in the market than Alphabet right now. Investors should take notice and pick up this market leader while it's down 12% from its all-time high today.

2. Airbnb

Unlike Alphabet, Airbnb's growth catalyst is set to take effect in 2022. The travel company, which matches guests to hosts across the world, has had a difficult two years with the raging COVID-19 pandemic. Travelers are coming back in force, showcased by these growing TSA checkpoint travel numbers.

Data source: TSA.

Through hosts opening their homes up and people willing to travel, Airbnb is set to have a great 2022. Additionally, Airbnb is benefiting from the work-from-anywhere trend as management has noticed an increasing amount of stays lasting for multiple months. People are working in a city for a few months and then moving somewhere else to experience more of the world than previously possible. CEO and co-founder Brian Chesky announced during the fourth-quarter 2021earnings callthat he would be following in the footsteps of more than 175,000 guests and begin living at different Airbnb properties.

Airbnb also introduced experiences during the pandemic, where local experts can give tours, boat rides, or lead yoga classes. Investors are yet to see Airbnb fully execute in a quarter (as it went public in December 2020), but that could happen later this year.

For 2021, the results were still excellent. Full-year revenue grew 77% to $6 billion over last year and exceeded 2019's levels, showing Airbnb has captured market share even during a difficult period. Fourth-quarter sales were even stronger, with total sales up 38% over 2019's Q4 total. Management is excited for the first quarter of 2022, as they expect nights and experiences booked to far exceed 2019's numbers, and it could be their strongest quarter ever.

Despite these rosy comments, the stock is down 20% since reporting earnings on Feb. 15 and almost 30% from its all-time high. Trading at 43 times price-to-free cash flow, Airbnb is a great purchase at these levels.

Both Alphabet and Airbnb have strong tailwinds and 2022's results look like they will showcase their success. While the news cycle is negative is often the best time to purchase stocks. Investors should consider taking advantage of the sale price today and purchase these stocks, with the mindset of holding for three to five years. Alphabet and Airbnb's businesses are only getting stronger, so use the current stock weakness to your advantage.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keithen Drury owns Airbnb, Inc., Alphabet (C shares), and Costco Wholesale. The Motley Fool owns and recommends Airbnb, Inc., Alphabet (A shares), and Costco Wholesale. The Motley Fool recommends Alphabet (C shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.