Data doesn’t lie: This has been one of the worst starts to a year for the stock market in about 50 years. Since hitting their respective record-closing highs, the famous Dow Jones Industrial Average, benchmark S&P 500, and growth-driven Nasdaq Composite (^IXIC 0.90%), have respectively plunged by as much as 19%, 24%, and 34%. The magnitude of these declines firmly places the S&P 500 and Nasdaq in a bear market.
Although the velocity and unpredictability of downside moves during bear markets can test the resolve of investors, one thing that is certain is that every notable decline throughout history — including in the Nasdaq Composite — has eventually been wiped away by a bull market. In other words, every crash, correction, and bear market has represented the ideal time for opportunistic investors to go shopping.
The current Nasdaq bear market has unearthed a number of incredible deals among innovative, high-growth businesses. What follows are five superb growth stocks you’ll regret not buying during this bear market dip.
The first remarkable growth stock that’s begging to be bought with the Nasdaq tumbling into a bear market is cloud-based lending platform Upstart Holdings (UPST 3.79%). Though clear concerns exist about loan demand with interest rates rising, Upstart has demonstrated it has the tools to succeed in virtually any economic environment.
Rather than relying on the decade’s-old method of vetting loans, Upstart’s platform leans on artificial intelligence (AI). During the first quarter, just shy of three-quarters of all loans were fully automated, which saves applicants time and institutional lenders money.
What’s even more important is that Upstart’s lending platform has opened the door to applicants who might not otherwise be approved with the traditional loan-vetting process. The average credit score for Upstart platform applicants is lower than the average credit score of traditionally vetted applicants, but the delinquency rate for both groups has been similar. In other words, Upstart’s AI-driven process is broadening the applicant pool for banks and credit unions without increasing risk.
Upstart has also begun to push into the auto loan origination market, which is a considerably larger opportunity, in terms of existing outstanding loan value, than personal loans.
A second magnificent growth stock you’ll be kicking yourself over if you don’t buy it on the Nasdaq bear market dip is telehealth company Teladoc Health (TDOC 4.88%). Despite grossly overpaying for applied health-signals company Livongo Health in 2020, Teladoc is on track to be an indispensable player in the healthcare space.
While skeptics have viewed virtual visits as nothing more than a COVID-19 beneficiary, Teladoc’s sales growth suggests otherwise. In the six years leading up to the pandemic, it was growing its top line by an average of 74% per year.
The reason Teladoc has been able to deliver such phenomenal sales growth is because it’s completely changing the way care is administered. Telehealth provides benefits up and down the treatment chain. It’s more convenient for patients, can allow physicians easier access to patients with chronic illnesses, and is generally less costly than in-person visits, which makes it an appealing option for health insurers.
Though the Livongo deal was overpriced, the combination of Teladoc and Livongo will allow for ample cross-selling opportunities and bolster the company’s chances of gaining chronic-care subscribers.
Just because a company has a megacap valuation doesn’t mean it can’t deliver superb returns for investors. That’s why you’ll regret it if you don’t buy shares of Alphabet (GOOGL -0.21%) (GOOG -0.27%) on this Nasdaq bear market dip. Alphabet is the parent company of internet search engine Google and streaming platform YouTube.
The big concern skeptics have with Alphabet is that ad revenue could fall as the risk of an economic slowdown or recession grows. However, this objection overlooks the simple fact that recessions are often short-lived, whereas economic expansions typically last years. Since ad revenue is cyclical, Alphabet is in great shape to take advantage of an expanding U.S. and global economy.
When it comes to internet search engines, Google is a veritable monopoly. Over the past two years, it’s controlled no less than 91% of worldwide internet-search market share, according to GlobalStats. This makes it the go-to choice of advertisers, and gives Google exceptional ad-pricing power.
But Alphabet’s ancillary operating segments are possibly even more exciting. YouTube is the second-most-visited social media website on the planet (2.56 billion monthly active users), and Google Cloud is the global No. 3 in cloud infrastructure spending. Google Cloud has the potential to help Alphabet double its operating cash flow by mid-decade.
Green Thumb Industries
U.S. marijuana stock Green Thumb Industries (GTBIF -0.38%) is another amazing growth stock you’ll regret not scooping up as the Nasdaq plunges. Even though Congress has failed to pass cannabis-reform measures, there’s more-than-enough opportunity among the three-quarters of all states to have legalized weed for multi-state operators like Green Thumb to thrive.
At the beginning of May, Green Thumb had 77 operating dispensaries spread across 15 states. While it does have a presence in a number of high-dollar markets, Green Thumb has placed a lot of emphasis on entering limited-license markets. By operating in markets where aggregate dispensary-license issuance is limited, Green Thumb has ensured it’ll have a fair shot to grow its brand and build a loyal following.
However, what really makes Green Thumb special is the company’s product mix. Well over half of its revenue comes from derivatives. These are alternative cannabis products, such as beverages, vapes, oils, and so on. Derivatives come with a higher price point and juicier margins than traditional dried cannabis flower.
If you need one more good reason to believe in the buzz surrounding Green Thumb Industries, consider that, unlike many of its peers, it’s been profitable for seven consecutive quarters.
A fifth superb growth stock you’ll regret not buying on the Nasdaq bear market dip is payment-processor Visa (V 1.16%). While Visa is cyclical and therefore susceptible to spending weakness if a recession materializes, the long-term growth outlook for this payment-processing kingpin hasn’t wavered.
As I alluded to when discussing Alphabet, the great thing about cyclical businesses is that they spend far more time in the sun than under gray clouds. The natural expansion of global economies, along with steady increases in consumer and enterprise spending, is what allows Visa’s needle to point perpetually higher.
Visa’s fiscal prudence is another reason for its success. Though the company would have little trouble generating fees and interest income as a lender, it avoids lending and strictly sticks to payment processing. It’s a business decision that shareholders have come to appreciate during economic contractions. Since it doesn’t lend, Visa doesn’t have to set aside capital for loan losses.
There’s also a long runway for payment-infrastructure expansion. Most global transactions are still being conducted with cash, so Visa has ample opportunity to organically or acquisitively push into emerging/underbanked markets.