Nasdaq bear market: 5 fantastic growth stocks you’ll regret not buying on the downside
Whether you’ve been investing in the stock market for decades or just started investing your money on Wall Street, it’s been a tough year. The S&P500The first-half comeback was his worst in more than half a century.
Meanwhile, things have been even more difficult for countries dependent on growth. Nasdaq Compound (^IXIC -0.50%). Since hitting its record high in mid-November, the Nasdaq has plunged as much as 34%. Even with a modest rebound from its lows, the index is firmly entrenched in a bear market.
But there is an interesting fact about bear markets that all patient investors should know. Namely, every bear market decline and stock market correction throughout history has ultimately been erased by a bull market rally. This means that any major declines in major US indices, including the growth-oriented Nasdaq Composite, are opportunities for long-term investors to pounce.
Right now, growth stocks offer some of the most attractive valuations on Wall Street. Below are five fantastic growth stocks you’ll regret not buying during the current Nasdaq bear market decline.
The first phenomenal growth stock you’ll jump into if you don’t recoup it on the Nasdaq bear market decline is the China-based electric vehicle (EV) maker Nio (NIO -3.25%). Although auto stocks are facing a wave of shortages of semiconductor chips and parts related to the COVID-19 pandemic, these are short-term concerns that do not alter Nio’s long-term growth trajectory.
We’ve already had a brief glimpse of the company’s ability to ramp up production. In June and July, Nio delivered 12,961 EVs and 10,052 EVs respectively. Before the pandemic threw a wrench into national supply chains, Nio’s management team believed it would hit an annual pace of 600,000 EV (50,000 EV/month) by the end of the year. Once parts availability improves, little will stand in the way of Nio expansion.
Investors should also appreciate the company’s innovation, which can be seen on several fronts. Nio has regularly introduced new vehicles to its lineup to broaden its appeal to domestic EV buyers. The ET7 sedan, whose deliveries began in late March, and the ET5 sedan, which is expected to ship to customers in September, can travel 621 miles on a single charge with the top battery upgrade.
There’s also Nio’s battery-as-a-service (BaaS) subscription, which it introduced in August 2020. With BaaS, buyers get a discount off the purchase price of their EV and can charge, swap and upgrade their batteries later. Date. For Nio, the upside is high-margin monthly subscription revenue and first-time buyer loyalty.
If you like low profile growth companies, biotech stocks Exelixis (EXEL 0.37%) represents the perfect buy after the Nasdaq bear market decline.
If there’s one good thing about health stocks, it’s that they’re defensive. No matter how poorly the US economy or stock market performs, or how high inflation is, patients will continue to need prescription drugs, medical devices and health services. This puts a fairly secure floor under stocks of drugs like Exelixis.
What makes this cancer drug developer so special is its blockbuster drug Cabometyx. Cabometyx is approved to treat first-line and second-line renal cell carcinoma, as well as advanced hepatocellular carcinoma that has already been treated. These indications alone offer more than $1 billion in annual sales potential. But with somewhere in the neighborhood of six dozen clinical studies underway to evaluate Cabometyx as a monotherapy or combination therapy in an assortment of cancer types, label expansion is a very real possibility.
Moreover, Exelixis swims with silver. It ended in March with about $2 billion in cash, cash equivalents, cash equivalents and restricted investments. Having such capital has enabled the company to relaunch its internal search engine and fund numerous drug development partnerships.
A third fantastic growth stock just waiting to be bought, and which you’ll regret not buying while it’s down, is the payment processor Visa (V 1.12%). Although financials generally take the chin during periods of economic weakness, Visa has enduring competitive advantages that minimize its difficulties.
On a macro basis, Visa and its peers are benefiting from the disproportionate amount of time the US economy is spending developing. Although recessions are inevitable, they do not last very long. If Visa shareholders are patient, they can take advantage of the natural expansion of the US and global economy over time.
On a company-specific basis, Visa is the most dominant player in the United States (the world’s largest consumer market). In 2020, it held 54% of the credit card network’s purchase volume in the United States – 31 percentage points more than the nearest competitor – and was the only payment processor to see a significant expansion of its leaves after the Great Recession (2007-2009).
Visa’s growth track is also exceptionally long. Since most global transactions are still conducted in cash, Visa has the opportunity to force its way into potentially underbanked regions, as it did with the acquisition of Visa Europe in 2016. Or it could choose to organically infiltrate the Middle East, Africa and the Southeast. Asia region with its payment infrastructure over time. Sustained double-digit growth should be the expectation of Visa shareholders.
Care British Columbia
The fourth growth stock that has incredible value during this Nasdaq bear market decline is the US marijuana stock. Care British Columbia (CCHFF 2.92%). As you’re about to see, Columbia Care is a particularly smart way to play the American pot industry if you’re also bullish on the multistate operator (MSO). Cresco Laboratories (CRLBF 1.27%).
For starters, the US cannabis industry is expected to be booming for much of this decade. Cannabis research firm BDSA predicts that the U.S. legal weed market will grow from $29 billion in recorded sales in 2021 to approximately $61 billion by 2026. That’s a compound annual growth rate of 16% for those of you who hold the score at home.
As a bonus, cannabis has acted as a non-discretionary item throughout the COVID-19 pandemic. This means that consumers are buying regardless of inflation or a deteriorating economic outlook.
What makes Columbia Care so attractive is its growth strategy and its ongoing acquisition by Cresco Labs. Regarding the first, Columbia Care has used acquisitions to rapidly expand its retail presence. It has become a major player in Colorado (the nation’s #2 weed market by annual sales) and has a footprint in most high-dollar markets.
As for the ongoing buyout, the combination of Cresco and Columbia Care will create an MSO with more than 130 operating dispensaries and a footprint in 18 states. It will be the leading pot wholesale business in the United States, with a rapidly expanding (and higher-margin) retail presence. The icing on the cake is that Columbia Care is trading at an 8% discount to Cresco’s proposed all-share buyback price, presenting an arbitrage opportunity for investors.
The fifth and final fantastic growth stock you’ll regret not buying during the Nasdaq bear market decline is a cloud-based application monitoring and security company. Datadog (DOG 2.53%). Although Datadog enjoys a significant premium to sales and earnings per share, it is also the fastest growing company on this list (a compound annual growth rate of 74% between 2017 and 2022, based on the company’s forecast for 2022).
It’s no secret why Datadog is growing so quickly. Companies routinely transferred their data to the cloud before the pandemic. Since the COVID-19 pandemic hit, this change has accelerated. With Datadog offering solutions that enable enterprises to monitor and secure their applications, it is perfectly positioned for what could become a sustainable hybrid work environment.
Arguably what’s been most impressive about Datadog isn’t necessarily its strong customer growth. Rather, it is the company’s ability to generate important organic growth of its existing customers. At the end of March 2022, Datadog had a 19-quarter streak (three months before five years) of a net dollar retention rate of at least 130%. This means that existing customers spend on average at least 30% more in the comparable quarter of the following year.
To add, Datadog noted at the end of 2020 that 22% of its customers were using four or more products, with 3% buying six or more. By the end of March 2022, 35% were using four or more products and 12% had “switched” to six or more. This really is proof that Datadog is growing its business from within.
With a steadily growing total addressable market and the company having pushed decisively towards recurring profitability, now is the time for opportunistic investors to strike.