Nasdaq Bear Market: 5 Tremendous Growth Stocks You’ll Regret Not Buying on the Dip
This has been a memorable year for investors, seemingly in all the wrong ways. Since major U.S. indices hit their respective closing highs between mid-November and the first week of January, the timeless Dow Jones Industrial Averagewide seat S&P500and growth oriented Nasdaq Compound (^IXIC 1.88%) lost up to 19%, 24% and 34% of their value. You will notice by the decline of the S&P 500 and the Nasdaq that both indices have entered a bear market.
Although bear markets don’t happen very often, they can be scary, especially for new investors. The speed and unpredictability of downward moves can cause investors to question their resolve. Yet history shows that buying during bear market declines is a stroke of genius. Since every notable drop in major US indexes is eventually erased by a bull market, double-digit percentage declines are your green light to shop around.
It’s a particularly good time to go bargain-hunting for growth stocks, which have been disproportionately strangled by the Nasdaq bear market. What follows are five terrific growth stocks ripe for the picking that you’ll regret not buying during the Nasdaq bear market decline.
The first phenomenal growth stock you’ll want to buy during the Nasdaq bear market decline is the fintech giant PayPal Credits (PYPL 0.78%). Although Wall Street worries about the short-term impact of historically high inflation on digital spending, they ignore the long-term potential of this industry leader.
One of the best things about peer-to-peer digital payment platforms is that they are still in the very early stages of their growth. Despite supply chain and inflation challenges, PayPal’s total payment volume still grew 15% at constant exchange rates in the first quarter to 2.4 million new net active accounts. These are very respectable numbers given the 1.6% retracement of US gross domestic product in the first quarter.
More importantly, we are seeing a steady increase in active user engagement across PayPal platforms. At the end of 2020, active accounts performed 40.9 transactions over the last 12 months (ttm) period. But at the end of the first quarter (March 2022), active accounts made an average of 47 transactions on the ttm. Since PayPal is a paying business, the increased engagement of active users bodes well for continued double-digit profit growth.
PayPal is historically cheap and ripe for choice by opportunistic investors.
Palo Alto Networks
The next terrific growth stock just begging to be bought during the Nasdaq bear market decline is the cybersecurity company Palo Alto Networks (PANW 1.40%). Although more expensive than many growth titles, Palo Alto has a trio of catalysts in its sails.
First, cybersecurity has become a service of prime necessity. No matter how the economy and/or stock market performs in the United States, hackers and bots never stop trying to steal company and customer data. This places a predictable demand floor under most cybersecurity stocks, including Palo Alto.
Second, Palo Alto is in the midst of a multi-year transition that shifts its focus away from physical firewall products towards cloud-based subscriptions. Cloud-focused cybersecurity solutions are more agile and efficient in responding to potential threats. Additionally, subscriptions can generate higher margins and more stable cash flow than physical firewall products.
Finally, Palo Alto differentiates its product offerings and expands its ecosystem by regularly making complementary acquisitions. These small buyouts allow the company to reach a wider audience, as well as sell its security solutions.
Another awesome growth stock to buy with the Nasdaq dipping into bear market territory is the semiconductor chip solutions provider Broadcom (AVGO 0.35%). Aside from the fact that semiconductor stocks are cyclical and the US economy has shown many harbingers of recession, Broadcom has a few tricks up its sleeve that make it a no-brainer buy.
For example, Broadcom should enjoy steady sales growth thanks to the 5G revolution. It’s been about a decade since telecom providers significantly improved wireless download speeds. Continuously upgrading wireless infrastructure to support 5G speeds helps Broadcom, given that the company provides 5G wireless chips and other accessories found in next-generation smartphones.
Additionally, this is a company that ended 2021 with a historically high backlog of $14.9 billion. Even if short-term demand were to drop a bit, the company’s huge backlog would ensure stable operating cash flow. It’s this cash flow that has helped Broadcom increase its quarterly dividend by more than 5,700% since 2010.
Finally, cyclical stocks like Broadcom spend much more time in the sun than in the clouds. Although recessions are inevitable, they usually only last a few quarters. By comparison, booms often last for years.
Green Thumb Industries
A fourth incredible growth stock that you will regret not buying on the downside is the US marijuana stock. Green Thumb Industries (GTBIF 0.71%). Even if Congress hasn’t passed any cannabis legalization or banking reform measures, there are more than enough catalysts for multi-state operators (MSOs) like Green Thumb to thrive.
By the end of March, Green Thumb had more than six dozen dispensaries operating, many of them in high-dollar markets. Interestingly, however, the company has focused its efforts on penetrating limited license markets. A limited license state is one that deliberately restricts the issuance of retail licenses to give all licensees a fair chance to grow their brands and gain a customer base.
What makes Green Thumb Industries truly special is its product line. Well over half of the company’s sales come from the sale of in-jar merchandise, such as drinks, vapes and oils. Cannabis-derived products offer significantly higher prices and margins than dried cannabis. It is this revenue mix that has helped Green Thumb generate seven consecutive quarters of generally accepted accounting principles (GAAP) earnings.
Given that most marijuana stocks still haven’t reached profitability, this shows how far Green Thumb is ahead of the competition, compared to its peers.
The payment processor is the fifth and final terrific growth stock that you will regret not buying. MasterCard (MY 0.38%). Short-term recession fears shouldn’t scare patient investors away from a clear leader like Mastercard.
The cyclical nature of payment processors is one reason to buy Mastercard with confidence. As I described with Broadcom, economic expansions last much longer than contractions and recessions. Buying and holding Mastercard allows investors to take advantage of the natural expansion of the US economy.
Mastercard also happens to be the #2 payment processor by purchase volume on the credit card network in the United States. Being No. 2 is an enviable position in the world’s largest consumer market.
Investors should note that Mastercard sticks strictly to the payment processing side of the equation. Although it has no problem collecting interest income as a lender, it would expose the company to defaults and write-offs during the inevitable recessions. Avoiding loans means not having to set aside capital to cover loan losses, which is a key reason Mastercard’s profit margin has remained above 40%.