It’s a tough time to be an investor. Whether you’ve put your money to work on Wall Street for decades or are relatively new to investing, you’ve witnessed the worst first-half performance for the broad spectrum. S&P500 in 52 years!
Moreover, stock-dependent growth Nasdaq Compound (^IXIC 2.11%), which is largely responsible for driving the market to record highs, did even worse. From peak to peak, the Nasdaq Composite lost up to 34% of its value and was firmly entrenched in a bear market.
While it’s undeniable that bear markets can be scary given the speed and unpredictability of bearish moves, history also shows that they are the perfect time for long-term investors to pounce. Indeed, every major drop in US indices, including the Nasdaq Composite, is eventually erased by a bull market rally.
With growth stocks at the stake during this downturn, they are arguably the best place for patient investors to put their money to work. Below are five unprecedented growth stocks you’ll regret not buying during the Nasdaq bear market decline.
The first incredible growth stock just begging to be bought during the Nasdaq bear market decline is none other than FAANG stock. Amazon (AMZN 2.66%). Despite near-term concerns about weak retail sales and historically high inflation, Amazon’s highest-margin operating segments are firing on all cylinders.
Although most people think of Amazon’s main online marketplace when they hear the company’s name, online retail sales generate extremely thin margins. What has been far more important to the company is how its market leader has helped generate higher margin revenue. For example, the company’s marketplace has helped it enroll more than 200 million Prime members globally, as of April 2021. Amazon makes nearly $35 billion in annual sales from subscription services.
To add, with the company expected to bring in nearly $0.40 of every dollar in U.S. online retail sales in 2022, Amazon’s ad revenue has skyrocketed. Amazon generates $35 billion in annual sales at the rate of sales from advertising services alone.
But the company’s golden ticket is undoubtedly its cloud infrastructure segment, Amazon Web Services (AWS). Cloud spending is still in the early stages of growth, and AWS reported about 31% of global cloud services revenue in the second quarter, according to a Canalys report. Since cloud services operating margins revolve around online retail margins, AWS has the potential to more than triple Amazon’s operating cash flow by mid-decade.
The online services market is a second unmatched growth stock investor that will flip if it doesn’t buy during the Nasdaq bear market decline. Fiver International (FVRR 6.66%). Even though the weakening US economy has cast doubt on business spending in the near term, Fiverr is uniquely positioned to benefit from it over several years.
Key to Fiverr’s success is going to be its ability to stand out in an increasingly crowded space. The good news is that the company does this in two ways. First, Fiverr freelancers present their scope of work as a package, rather than on an hourly basis. Providing an all-inclusive (i.e., transparent) price is something Fiverr customers seem to appreciate, as evidenced by the continued growth in spend per buyer, even in the face of a weaker US economy.
As I recently pointed out, the other difference with Fiverr’s operating model can be seen in its participation rate. The “take-rate” describes the amount of money Fiverr keeps for transactions traded on its platform. While most of the company’s peers have a teenage turnout, Fiverr’s turnout has steadily increased and currently sits at just under 30%. The simple fact that Fiverr’s engagement rate continues to climb as it adds new active buyers demonstrates the pricing power of this already profitable platform.
The third record-breaking growth stock you’ll regret not recouping during the Nasdaq bear market decline is an edge computing company Rapidly (FSLY 7.58%). Although Fastly’s larger-than-expected losses over the past two quarters have been an eyesore, the company is well positioned to thrive over the long term as data moves online and into the cloud.
Simply put, Fastly is responsible for delivering data from the edge of the cloud to end users as quickly and securely as possible. Since the COVID-19 pandemic took shape, we’ve seen quite a drastic shift in traditional workplace and content consumption habits. With more and more people working remotely and businesses moving their data to the cloud at an accelerated rate, companies like Fastly are more reliable than ever. That’s great news for a usage-driven operating model like Fastly’s.
Without overlooking the disappointment of Fastly’s larger quarterly losses, investors should also note that the company’s total number of customers continues to grow and its dollar net expansion rate (DBNER) has stabilized around 120. %. DBNER is a measure of how much more (or less) existing customers are spending in the current year compared to the previous year. A figure of around 120% suggests that existing customers are spending around 20% more year over year.
A fourth noteworthy growth stock you’ll regret not buying as the Nasdaq plunges is US Multistate Cannabis Operator (MSO) Cresco Laboratories (CRLBF 2.40%). Although Wall Street remains disappointed that the US federal government has not legalized marijuana, there are more than enough opportunities at the state level for a company like Cresco to profit enormously.
The Cresco Labs marijuana stock looks like an intriguing investment for two reasons. For starters, it’s heavily focused on expanding into limited license markets. These are markets where regulators deliberately limit both the total number of dispensary licenses issued, as well as the total number of retail licenses a single company can hold. Targeting limited license states will give Cresco Labs a fair chance to grow its brands without being overtaken by a deeper-pocketed MSO.
Additionally, Cresco is in the midst of a transformative acquisition. Before the end of the year, the full takeover by Cresco of MSO Care British Columbia should close. When complete, the combined company will have more than 130 operating dispensaries in 18 states.
The second factor that makes Cresco such a smart buy is its industry-leading wholesale operations. Although wholesale cannabis generates lower margins than retail operations, Cresco holds a coveted cannabis distribution license in California that allows it to place its proprietary pot products in more than 575 dispensaries. In other words, it’s gaining volume, even with lower margins.
The fifth and final unparalleled growth stock you’ll regret not buying during the Nasdaq bear market decline is the payment processor MasterCard (MY 1.75%). Although the growing likelihood of a US and/or global recession worries Wall Street, Mastercard brings clearly identifiable competitive advantages to its shareholders’ table.
One of the coolest things about Mastercard is its cyclical links. While this exposes the business to lower revenue generation during recessions, it is important to note that recessions do not last very long. In comparison, periods of economic expansion are almost always measured in years. Just sitting back and allowing time to run its course should allow Mastercard investors to benefit from a steady increase in consumer and business spending.
Another thing to consider is that Mastercard deliberately avoids lending. Even though it is a well-known brand that would probably have no problem generating interest income and fees as a lender, it would also expose the company to defaults and debts. potential write-offs during recessions. Not having to set aside capital to cover loan losses is one of the main reasons Mastercard’s profit margin remains firmly above 40%.
Mastercard’s growth streak is also huge. Since most global transactions are still conducted in cash, Mastercard has plenty of opportunities to expand its infrastructure in underbanked markets or make acquisitions to expand its reach.