There’s no question that it’s been a challenging year to be an investor. Since hitting all-time closing highs in January, the iconic Dow Jones Industrial Average has entered correction territory with a loss of more than 10%, while the benchmark S&P 500 briefly dipped into a bear market.
It’s been an even tougher slog for the growth-stock-dependent Nasdaq Composite (^IXIC 3.33%), which tumbled as much as 31% on a peak-to-trough intraday basis, as of last weekend. This, too, firmly places the index in a bear market.
Although the velocity of downside moves during corrections and bear markets can be scary, and big declines can pull on investors’ heartstrings, history has repeatedly shown that sizable pullbacks are the ideal time to put your money to work. Every single crash, bear market, and double-digit correction throughout history — including the Nasdaq Composite’s dot-com bubble burst — has eventually been cleared away by a bull market rally.
Right now, many of the market’s top bargains happen to be growth stocks. What follows are four exceptional growth stocks you’ll regret not buying on the Nasdaq bear market dip.
The first phenomenal growth stock well-deserving of attention from long-term investors is e-commerce platform Etsy (ETSY 4.98%). Despite historically high inflation adversely impacting lower-income consumers at the moment, Etsy has a couple of key advantages that should help it sustain a double-digit growth rate for a long time.
The biggest differentiating factor for Etsy is the composition of its merchants. Whereas most online retail platforms are impersonal and based purely on volume, Etsy’s merchants are almost always small businesses that create unique goods or provide customizable services. There’s no platform at scale where merchants engage on a more personal level with shoppers, which is what makes Etsy so untouchable from a competitive standpoint.
Something else impressive about Etsy’s operating model has been its ability to transform casual shoppers into habitual buyers. A “habitual buyer” is someone who spends at least an aggregate of $200 over the trailing-12-month period and makes at least six separate purchases.
Even taking into account that the retail landscape has softened a bit due to inflation, Etsy saw the number of habitual buyers on its platform grow 224% between the end of 2019 (pre-pandemic) and the end of 2021. This incredible growth should allow the company to charge merchants progressively more for ads and various services.
Etsy looks like a screaming bargain at roughly 20 times Wall Street’s forward-year earnings forecast.
Another exceptional growth stock you’ll almost certainly regret not buying on the dip is biotech company Novavax (NVAX 17.46%). Although Novavax delayed filing for emergency-use authorization for its COVID-19 vaccine in a number of key markets last year, thereby missing some proverbial low-hanging fruit in developed markets, the company looks poised to capitalize on its lead vaccine and other pipeline developments.
The Novavax COVID-19 vaccine, NVX-CoV2373, has a number of competitive advantages. For instance, it’s a protein-based vaccine and not messenger-RNA-based. This has the potential to encourage COVID-19 vaccine holdouts to get the jab.
What’s more, it’s one of only three global COVID-19 vaccines to reach the elusive 90% threshold for vaccine efficacy (VE). Such a high VE should allow Novavax to become a staple for booster shots in developed countries, as well as initial inoculations in emerging markets.
Equally intriguing is the potential Novavax offers in developing combination vaccines (e.g., influenza and COVID-19). Whereas Novavax trailed competitors when it brought its COVID-19 vaccine to market, it could be one of the first (if not the first) to bring a combo vaccine to pharmacy shelves.
You can pick up shares of Novavax for a little over two times Wall Street’s forecast earnings in 2022.
A third exceptional growth stock you’ll regret not scooping up on the Nasdaq bear market dip is data-mining company Palantir Technologies (PLTR 5.86%). Despite previously trading at nosebleed multiples to its sales and adjusted earnings — Palantir’s shares are down more than 80% from its all-time high — it has all the tools necessary to make patient investors richer.
What makes Palantir such an intriguing stock is that no other company comes close to offering the scale of solutions it can provide. Its artificial-intelligence-driven Gotham platform services government entities and provides assistance with missions and data aggregation. Meanwhile, its Foundry platform helps enterprise customers make sense of their data to streamline their operations.
For the past couple of years, Gotham has been Palantir’s driving force. Large government contract wins that often last four or five years have propelled annual sales growth of 40% (or higher). But moving forward, Foundry is the company’s golden ticket to riches. Whereas Gotham has a tangible ceiling (i.e., there are only so many government entities worldwide Palantir will allow to use its solutions), Foundry has just scratched the tip of the iceberg with regard to its potential.
Palantir is a company that offers sustained sales growth of 25% to 30% annually. There’s simply no replacement for the services it can deliver.
U.S. marijuana stocks are another area where you’ll find exceptional growth at an incredible value — and you’ll likely be kicking yourself if you don’t buy at these prices. The name to consider now is multi-state operator (MSO) Cresco Labs (CRLBF -2.35%).
The big issue for U.S. pot stocks is overcoming the lack of reform at the federal level. It was widely expected that cannabis would be legalized (or at the very least, it was anticipated there would be banking reforms) with Democrats in control of Congress. Despite none of this coming to pass, three-quarters of all states have given the green light to weed in some capacity, including 18 states which allow adult-use consumption and/or retail sales. There’s plenty of organic opportunity here for Cresco Labs, even if the federal government fails to pass cannabis reforms.
Like most MSOs, Cresco has a burgeoning retail presence. At the end of March, the company had 50 operating dispensaries and announced plans to acquire MSO Columbia Care (CCHWF 0.52%) in an all-stock deal. Columbia Care’s growth-by-acquisition strategy should give Cresco a sizable retail footprint, assuming the deal closes.
But what’s really separated Cresco from other MSOs is its industry-leading wholesale operations. Even though wholesale cannabis produces inferior margins to retail operations, Cresco’s access to more than 575 dispensaries in California, the largest weed market in the U.S., gives it the volume needed to make wholesale highly lucrative.
Look for Cresco Labs to maintain double-digit annual sales growth for years to come.