Since the early 1950s, the broad base S&P500 suffered 39 separate double-digit percentage declines. That equates to one every 1.85 years – and it’s most definitely one of those years. In the first six months of 2022, the S&P 500 posted its worst performance in more than half a century.
And yet, things have been even worse for tech-focused companies Nasdaq Compound (^IXIC 0.01%)which was largely responsible for elevating the broader market to record highs in 2021. On a peak-to-trough basis, the Nasdaq has plunged as much as 38% since hitting its all-time high a year ago. one year old.
But therein lies the opportunity for investors. Even though stock market corrections, and even bear markets, are an integral part of investing, so is the fact that major indices recoup their losses (and even some) in the long run. Eventually, the Nasdaq bear market will be a thing of the past.
This is a particularly good time for opportunistic investors to pounce on innovative growth stocks that have been battered by poor market sentiment. Below are five jaw-dropping growth stocks you’ll regret not buying during the Nasdaq bear market decline.
The first surefire stock you’ll regret not buying as the Nasdaq plummets is Alphabet (GOOGL -0.95%) (GOOG -0.71%), the parent company of the YouTube streaming platform and the Google Internet search engine. Even as ad revenue takes a hit as the likelihood of a U.S. recession rises, Alphabet’s competitive advantages stand out as a beacon for opportunistic investors.
The key to Alphabet has long been its absolute dominance in internet search. According to data provided by GlobalStats, Google has accounted for 91% to 93% of global searches for over two years. This virtual monopoly leads to substantial advertising pricing power and a mountain of operating cash flow that the company can use to reinvest in other high-growth initiatives.
One such initiative is YouTube. One of the best acquisitions in history – Google acquired YouTube in 2006 for $1.65 billion – YouTube is the second most visited social media platform on the planet. As Alphabet looks for ways to further monetize YouTube Shorts, YouTube’s ad revenue needle is expected to be significantly higher in the long run.
There’s also Google Cloud, which is the world’s third-largest provider of cloud infrastructure services. Cloud spending is still, arguably, in its infancy, and Alphabet should be able to sustain an annual growth rate of nearly 40% as companies move data online and into the cloud.
Historically speaking, Alphabet has never been cheaper.
A second noteworthy growth stock just begging to be bought during the Nasdaq bear market decline is a dog-focused products and services company. Bark (BARK -3.28%). Although Bark continues to lose money, the company’s innovation, coupled with industry advantages, should allow this small-cap stock to shine.
The first factor working in Bark’s favor is that US pet spending is virtually recession proof. It has been more than a quarter century since year-over-year spending on pets has declined in the United States. Whether it’s pet food, veterinary care or other services, such as pet insurance, owners are willing to open their wallets a little more every year to ensure the health and the happiness of their furry, gilled, feathered or scaly family members. ).
Bark’s not-so-subtle secret that should allow it to outperform most pet retail stocks is that its operating model is primarily focused on direct-to-consumer sales. Although the timing of retail orders can fluctuate quite a bit (as has happened in the last quarter), traditional trade sales made in physical stores are typically only 10-15% of total revenue. This means that the majority of sales come from low overhead subscription services designed to generate predictable cash flow and a gross margin of around 60%.
On the innovation front, Bark has achieved many additional commercial successes since introducing Bark Bright for canine dental needs, and is expected to see similar success with the rise of Bark Eats, which adapts dry food diets. to certain breeds of dogs. These additional sales opportunities can really boost the gross margin.
The third jaw-dropping growth stock you’ll regret not recovering during the Nasdaq bear market decline is the cybersecurity stock. Okta (OKTA 1.61%). Although Okta’s Auth0 integration encountered some short-term slowdowns and resulted in larger quarterly losses, the future is looking brighter for this identity verification provider.
Similar to Bark, Okta relies on macro trends which are quite to their advantage. Just because Wall Street or the US economy is going through a tough time doesn’t mean bots and hackers are taking the time to try to access or steal sensitive information. As time passes and businesses move their data to the cloud, the responsibility to protect that information increasingly falls to third parties like Okta.
As I mentioned before, Okta’s cloud-native identity verification security platform is a big plus. Okta’s reliance on artificial intelligence allows its solutions to become more effective at identifying and responding to potential threats over time. With cybersecurity becoming a service necessity, double-digit sales growth should be expected for many years.
Eventually, Okta will also benefit from the takeover of Auth0. Despite higher integration costs in the short term, Auth0 allows Okta to enter the European market. International expansion is a necessary step that should help Okta maintain a double-digit growth rate.
Green Thumb Industries
A fourth incredible growth stock you’ll regret not buying as the Nasdaq falls is the US Multistate Cannabis Operator (MSO) Green Thumb Industries (GTBIF -4.63%). Even as federal cannabis reforms continue to fall flat, state-level marijuana legalizations provide more than enough catalyst for MSOs like Green Thumb to succeed.
At the end of September, Green Thumb had 77 operating clinics in 15 states. While some of those states are high-dollar markets, like California, Colorado, and Florida, what’s been particularly exciting about Green Thumb’s expansion is its push into limited license markets like Illinois, Ohio, Pennsylvania and Massachusetts. States where licensing is deliberately restricted help ensure that new entrants have a fair chance to establish their brands and build a customer base.
What really helped separate Green Thumb Industries from other MSOs was its revenue mix and operational performance. When it comes to the former, more than half of the company’s sales are generated by merchandise, such as vapes, edibles, beverages, pre-rolled joints, dabs and beauty products. Pot derivatives are more expensive than dried cannabis flower and, more importantly, have much better margins.
This brings us to the other key point: Green Thumb’s bottom line. While most US MSOs are still chasing their profitable first quarter, this company has produced nine consecutive quarterly profits, based on generally accepted accounting principles (GAAP). No matter what happens on Capitol Hill, Green Thumb is only going from strength to strength.
The fifth jaw-dropping growth stock you’ll regret not buying during the Nasdaq bear market decline is a Singapore-based conglomerate Sea Limited (SE -4.99%). Despite heavy losses in 2022 and likely 2023, Sea is building a unique trio of business segments that could drive market share significantly in the long run.
The first is Garena, the company’s digital entertainment segment which is powered by the hit mobile game Free fire. Even though quarterly active users returned in the quarter ended June to 619.3 million from 725.2 million a year ago, the most important thing to note is that 9.1% of those 619.3 million users paid to play. This is considerably higher than the pay-to-play ratio for the mobile gaming industry as a whole.
Second, Sea’s relatively nascent digital financial services segment is growing by leaps and bounds. Quarterly active users jumped 53% to 52.7 million at the end of June 2022. With Sea operating in a number of underbanked regions/emerging markets, access to digital wallets could be a high and sustainable growth opportunity .
Third, there is the Shopee e-commerce segment. Although online retail is not known for sustaining high margins, Shopee has been Sea’s stunning growth segment. Based on the company’s second quarter results, it’s recording an annual pace of $76 billion in gross merchandise value (GMV) on its platform. In 2018, Sea only had $10 billion in GMV. With growing adoption in Brazil and Southeast Asia, Shopee could be Sea’s ticket to a significantly higher valuation.
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