This year certainly didn’t turn out the way most investors expected. After a year in which the broad base S&P500The S&P’s biggest correction totaled 5% as investors of all stripes watched the benchmark plunge into bearish territory in 2022. In fact, the S&P 500 produced its worst first-half return in 52 years.
But it is by no means the worst performing index. dependent technology Nasdaq Compound (^IXIC) has plunged 38% from peak to peak over the past year. The supercharged growth stocks that had driven the market to new highs are now being avoided at all costs by Wall Street and investors.
Yet therein lies the opportunity: just as investors are used to outpacing rising valuations during bull markets, the same thing happens when stocks look their darkest. While sentiment may be poor right now, long-term investors can pick up amazing bargains during the Nasdaq bear market.
The following are three phenomenal bargains that patient investors can buy right now that can double your money by 2027.
The first bargain that can potentially double your money over the next five years is Chinese internet search giant, Baidu (BEGIN -6.70%).
Baidu shares traded north of $320 in February 2021, but ended last week at $85. Everything from heightened regulatory scrutiny in China to the country’s zero-COVID strategy, which has crippled supply chains in various provinces, has weighed on Wall Street’s opinion of Baidu. Fortunately, this fear is your opportunity to pounce.
Baidu’s foundation is based on its Internet search segment, which is a real cash cow for the company. According to data from GlobalStats, Baidu accounted for 60% of China’s search engine market share in October 2022, 44 percentage points above its closest competitor.
China is the world’s second largest economy by gross domestic product and its middle class is booming. In other words, advertisers have an incentive to pay a premium on Baidu’s platform to get their message in front of these potential consumers.
Equally exciting is what Baidu is doing beyond its core operating segment. The company has invested heavily in cloud computing and artificial intelligence (AI). Even with economic growth challenged in China by the country’s zero-COVID strategy, AI Cloud revenue grew 31% in the quarter ended June.
Additionally, Baidu’s Apollo Go is currently the No. 1 autonomous vehicle transportation service in the world. Although these are smaller revenue segments at the moment, they are growing at a much faster rate than internet search.
Historically, Baidu is a company that has had no trouble maintaining a double-digit growth rate. While that may change in the near term, all signs continue to point to secular bull markets favoring its marketing, cloud and AI operating segments. Valued at just 9 times Wall Street’s forecast earnings for the coming year, Baidu looks like a screaming deal.
A second phenomenal business capable of triple-digit returns by 2027 is the biotech stock and COVID-19 vaccine developer Novavax (NVAX -5.19%).
Novavax makes Baidu’s 75% drop look like a walk in the park. During the COVID-19 pandemic, Novavax shares were changing hands for over $300. Shares ended last week at $19. Novavax was finally beaten on drugstore shelves by the likes of Modern and Pfizer/BioNTech, which has developed high-efficiency COVID-19 vaccines. Numerous emergency use authorization filing delays in the United States also did not help Novavax’s cause.
However, a strong argument can be made that the pessimists have overstepped their bounds with Novavax. First, it joins Moderna and Pfizer/BioNTech as the only companies to achieve vaccine efficacy (VE) of at least 90%. With a high EV and a vaccine that differentiates itself from messenger RNA products from Moderna and Pfizer/BioNTech — Novavax’s COVID-19 vaccine uses a protein to teach a person’s immune system to recognize and fight the SARS virus -CoV-2 — Novavax has a reasonable chance of generating strong recurring revenue globally from its COVID-19 vaccine.
Another thing that’s really important to recognize is that Novavax’s drug development platform works. The development and use of NVX-CoV2373 (the Company’s COVID-19 vaccine) in the United States and dozens of countries around the world suggests that Novavax can manufacture mutation-specific vaccines, if needed, or develop combination therapies. In a year or two, people may have the option of taking a combined flu and COVID vaccine.
Novavax is also sitting on a boatload of cash. As of June 30, the company had $1.38 billion in cash and cash equivalents. That’s more than enough money to advance promising preclinical and clinical trials.
Although Novavax has largely missed the low-hanging fruit, if you will, of high-margin COVID-19 vaccine sales in the United States, the global potential for recurring COVID-19 revenue (i.e. booster shots), as well as the expansion of its drug development platform, make it a bargain at its current price.
The third phenomenal offer that can double your money by 2027 is the online services market Fiver International (FVRR 7.85%).
True to the theme of this list, Fiverr has taken its shareholders on a roller coaster ride. In three years, the company’s stock went from mid-$20 to over $300 and back to mid-$20. Skeptics seem concerned about the growing likelihood of a recession in the United States and how this could negatively impact a business based on freelance/remote work.
Although recessions are an inevitable part of the business cycle, they tend to be much shorter events than bull markets and periods of economic expansion.
To add to this point, labor market dynamics have been permanently altered by the pandemic. Although some workers have returned to the office, the percentage of employees working part-time or full-time from home or remotely has increased significantly. This puts Fiverr’s freelance marketplace at the center of this remote work trend.
On a more company-specific basis, Fiverr brings clearly identifiable competitive advantages to the table. Instead of asking freelancers to price their jobs by the hour like virtually all of its competitors, Fiverr freelancers list their jobs as a flat rate. This greatly improves cost transparency, which has been a powerful tool to continue increasing spend per buyer.
The other important advantage, as I mentioned before, is Fiverr’s higher participation rate, which is the amount the company can keep from each deal traded on its platform. While most online service marketplaces deal with low to mid-size teen engagement rates, Fiverr reported a 29.8% engagement rate in the June quarter.
Given Fiverr’s sustained competitive advantages and double-digit growth rate, its forward price-to-earnings ratio of 25 looks like a boon for opportunistic investors.
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