Nasdaq Bear Market: 5 Tremendous Growth Stocks You’ll Regret Not Buying on the Dip
This has been a year for investors to remember in all the wrong ways. As the major US indices hit their all-time highs between mid-November and the first week of January, the timeless Dow Jones Industrial Average, the broad-based S&P 500, and the growth-driven Nasdaq Composite (^IXIC 1.88%) in There has been a decline. reduced by 19%, 24% and 34% of their value. You’ll notice from the declines in the S&P 500 and Nasdaq that both indexes have entered a bear market.
Although bear markets don’t happen often, they can be scary — especially for new investors. The speed and unpredictability of the downside could make investors question their resolve. Yet history shows that buying during a bear market downturn is a great move. Since every notable decline in the major US indices is eventually offset by a bull market, a double-digit percentage drop is your green light to make some purchases.
This is an especially smart time to bargain for growth stocks, which have been disproportionately crushed by the Nasdaq bear market. Thus there are five tremendous growth stocks to choose from that you will regret not buying on the Nasdaq bear market decline.
The first phenomenal growth stock you want to buy during the Nasdaq bear market decline is fintech behemoth PayPal Holdings (PYPL 0.78%). While Wall Street is concerned about the near-term impact of historically high inflation on digital spending, they are ignoring the long-term potential for this industry leader.
One of the best aspects of digital peer-to-peer payment platforms is that they are still in their early innings of development. Even with supply-chain and inflation-based challenges, PayPal’s total payment volume grew 15% on a constant-currency basis during the first quarter, with 2.4 million net new active accounts. These are highly respectable figures considering the 1.6% retracement for US GDP in the first quarter.
More importantly, we are seeing an ever-increasing engagement from users active on PayPal’s platform. At the end of 2020, active accounts were completing 40.9 transactions in the trailing-12-month (ttm) period. But by the end of the first quarter (March 2022), active accounts completed an average of 47 transactions on ttm. Since PayPal is a fee-driven business, increased engagement among active users bodes well for continued double-digit earnings growth.
PayPal has historically been cheap and ripe for opting out by opportunistic investors.
Palo Alto Network
The next tremendous growth stock that’s begging for a downside in a Nasdaq bear market is cybersecurity company Palo Alto Networks (PANW 1.40%). Despite being pricier than many growth stocks, Palo Alto has a trio of catalysts in its sails.
Firstly, cyber security has evolved into a basic necessity service. No matter how well or poorly the US economy and/or stock market perform, hackers and robots don’t take time out of trying to steal enterprise and customer data. This places a projected demand level below that of most cybersecurity stocks, including Palo Alto.
Secondly, Palo Alto is in the midst of a multi-year transition that is pushing physical firewall products in favor of cloud-based subscriptions. Cloud-centric cyber security solutions are agile and more effective at responding to potential threats. In addition, subscriptions can generate higher margins and steady cash flow than physical firewall products.
Lastly, Palo Alto is regularly diversifying its product offerings and expanding its ecosystem by making bolt-on acquisitions. These smaller buyouts allow the company to reach a wider audience as well as cross-sell its security solutions.
Another brilliant growth stock to buy with the Nasdaq falling into bear market territory is semiconductor chip solutions provider Broadcom (AVGO 0.35%). Putting aside the fact that semiconductor stocks are cyclical and the US economy has shown several recession warning signs, Broadcom has a few tricks up its sleeve that make it a no-brainer buy.
For example, Broadcom should enjoy steady sales growth as a result of the 5G revolution. It’s been almost a decade since telecommunications providers have made meaningful improvements in wireless download speeds. The ongoing upgrade of the wireless infrastructure to support 5G speeds helps Broadcom, given that the company supplies 5G wireless chips and other accessories found in next-generation smartphones.
Additionally, it is a company that ended 2021 with a historically high backlog of $14.9 billion. Even if near-term demand eases slightly, the company’s huge backlog will ensure steady operating cash flow. It’s this cash flow that has helped Broadcom increase its quarterly dividend by more than 5,700% since 2010.
As a final note, cyclical stocks like Broadcom spend far more time in the sun than in the clouds. Even though recessions are inevitable, they usually only last a few quarters. By comparison, the extension period often lasts for years.
Green Thumb Industries
The fourth surprising growth stock you’ll regret not buying on the dip is US marijuana stock Green Thumb Industries (GTBIF 0.71%). Even though Congress has failed to pass any cannabis legalization or banking reform measures, there are more than enough catalysts for multi-state operators (MSOs) like Green Thumb to flourish.
By the end of March, Green Thumb had more than six dozen operating dispensaries, many of them in high-dollar markets. Interestingly, though, the company is focusing its efforts on moving into limited-license markets. A limited-license state is one that deliberately issues retail licenses to all license holders to give them a fair chance to build their brand and gain a following.
What makes Green Thumb Industries really special is its product mix. More than half of the company’s sales come from the sale of derived pot products, such as beverages, vapes, and oils. Derived cannabis products offer significantly higher price points and margins than dried cannabis. It’s this revenue mix that has helped Green Thumb deliver seven consecutive quarters of generally accepted accounting principles (GAAP) profits.
Since most marijuana stocks still haven’t reached profitability, it shows how well Green Thumb is ahead of the competition relative to its peers.
The fifth and final tremendous growth stock that you’ll regret not buying on Dip is payment processor Mastercard (MA 0.38%). Fear of a short-term recession shouldn’t turn patient investors away from a clear leader like Mastercard.
The cyclical nature of the payment processor is one reason to buy MasterCard with confidence. As I described with Broadcom, economic expansion tends to last much longer than contraction and recession. By buying and holding a MasterCard, investors can take advantage of the natural expansion of the US economy.
The credit card network in the United States also happens to be MasterCard’s No. 2 payment processor by purchase volume. It is a clear position to be No. 2 in the largest market for consumption in the world.
Investors should note that MasterCard is strictly tied to the payment-processing side of the equation. While it would have no problem collecting interest income as a lender, doing so would expose the company to debt shortfalls and charge-offs during the inevitable recession. Avoiding lending means not setting aside capital to cover loan losses, which is a big reason why Mastercard’s profit margins remain above 40%.