Despite what 2021 might have you believe, the stock market does Not move up in a straight line. Since hitting its all-time intraday high in the first week of January, the benchmark has been S&P500 delivered a 28% peak-to-trough drop. To make matters worse, the bond market is having its worst year on record.
But for the technology-driven, it was even worse Nasdaq Composite (^IXIC 1.28%)fallen firmly in a bear market with a peak drop of 38% in less than a year. When uncertainty arises, it’s not uncommon for companies with high valuation premiums to take offense.
But therein lies the opportunity. Just as optimism during long-lived bull markets can cause stock valuations to skyrocket, pessimism during bear markets has been known to create amazing buying opportunities for patient investors. What follows are five impressive ones growth stocks You will regret not buying on the Nasdaq bear market dip.
The first great growth stock investors will regret not adding to the bear market decline FAANG giant Amazon (AMZN 1.88%). Though Amazon’s retail segment faces all sorts of headwinds as the likelihood of a U.S. recession increases, the company’s highest-margin businesses are firing on all cylinders.
Amazon’s claim to fame has long been the clearly dominant online marketplace. The company’s 14 closest competitors don’t even come close to matching the US online retail market share held by Amazon alone. However, online retail sales generate very low margins. That means Amazon’s primary revenue driver doesn’t play a critical role in generating operating cash flow.
What is the key for Amazon is that its high-margin trio of Amazon Web Services (AWS), subscription services, and advertising services continues to grow. AWS is the world’s leading provider of cloud infrastructure services, and enterprise cloud spending is arguably still in its infancy. Meanwhile, the company has used the popularity of its online marketplace as a catalyst to attract more than 200 million Prime members worldwide. All three of these higher-margin businesses continue to grow at double-digit rates.
Since Amazon is a company that reinvests most or all of its cash flow from operations, it pays to keep an eye on the company’s cash flow. In the 2010s, investors willingly paid 23 to 37 times year-end cash flow to own Amazon stock. You can buy shares today for about eight times Wall Street’s projected cash flow for the company in 2025 favorable for such a pioneering company.
A second phenomenal growth stock to look for when the Nasdaq plummets is furniture stocks love sack (LOVE 2.54%). Although Wall Street slammed shares over rising inventories, all signs and innovation continue to point to Lovesac as the long-term winner.
That The most important thing investors achieve with Lovesac is differentiation. Traditional furniture retailers rely on physical stores and source their products from a few wholesalers. Lovesac now generates about 88% of its net sales from ‘Sactionals’, modular sofas that can be rearranged in dozens of ways to fit most living spaces. Sactionals comes in over 200 cover options, can be ordered with several high-margin add-ons (such as surround sound systems), and the yarn used in these covers is made entirely from recycled plastic water bottles. No furniture retailer can match the functionality and eco-friendly aspect of Lovesac furniture.
On top of that, Lovesacs are targeting slightly higher price points at more affluent consumers. This makes the company less likely to be impacted by minor economic downturns and rapidly rising inflation.
The other standout catalyst is Lovesac’s omnichannel sales platform. During the pandemic, it was able to shift almost half of its sales online. The fact that there are multiple avenues for retailing its products beyond physical stores has helped reduce overhead and propel the company into profitability far beyond Wall Street’s expectations.
The third awesome growth stock you’ll regret not capitalizing on the Nasdaq bear market slump is semiconductor stock Broadcom (AVGO 4.77%). While cyclical stocks like Broadcom are almost always vulnerable to economic downturns, Broadcom has a few factors that should help it weather a possible recession better than its peers.
The key growth driver for Broadcom is the ongoing transition to 5G wireless infrastructure. It’s been about a decade since telcos upgraded their wireless infrastructure to support faster download speeds. The move to 5G should entice businesses and consumers to trade in their older devices to take advantage of superior download speeds. Broadcom derives much of its revenue from wireless chips and accessories used in next-generation smartphones.
Another reason investors can trust Broadcom is because of the company historically high order backlog. The company started 2022 with $14.9 billion in orders to fulfill and has bookings well into 2023, according to CEO Hock Tan. Should chip demand slow, Broadcom will have a significant cushion thanks to its backlog.
There are also enticing opportunities for Broadcom beyond its bread-and-butter smartphone segment. For example, the pandemic has accelerated the pace at which companies are moving data to the cloud. That should keep demand for all things data center related. Broadcom is a manufacturer of connectivity and access chips used in data center servers.
US marijuana stock Cresco Laboratories (CRLBF 1.26%) is a fourth stellar growth stock that you’ll be kicking yourself if you didn’t buy during the Nasdaq bear market slump. Even if cannabis reform legislation doesn’t pass on Capitol Hill, a plethora of state-level legalizations provide more than enough catalyst for multi-state operators (MSOs) like Cresco.
As of mid-October, Cresco had 54 pharmacies in 10 legalized states. Though it’s established quite a presence in medical-marijuana-legal Florida (20 dispensaries and counting), Cresco’s strategy of targeting limited-license states like Illinois, Ohio, Pennsylvania, and Massachusetts was smart. Restricted license states intentionally limit the total number of retail licenses issued as well as to a single entity. In other words, these are states where emerging companies like Cresco Labs have a fair shot at building their brands and gaining a loyal following.
To build on this point, Cresco is about to complete a major acquisition. It buys MSO Columbia care in an all-share deal that will increase the combined company’s commercial pharmacies to more than 130 and expand its footprint to 18 states.
However, it’s Cresco’s wholesale cannabis businesses that are really helping the company differentiate itself in an increasingly crowded cannabis market. Although wholesale cannabis generates lower margins than retail, Cresco has volume on its side. It holds a lucrative cannabis distribution license in California and can place its own brands in more than 575 retail locations. The Golden State is the nation’s largest cannabis market by annual sales.
The fifth awesome growth stock you’ll regret buying as the Nasdaq bears plummet is a cloud-based customer relationship management (CRM) software provider. Foreclosure (CRM -4.48%). Although rapidly rising interest rates are dampening the macroeconomic growth outlook for the US economy, Salesforce’s competitive advantages make it a no-brainer after his considerable retreat.
For those unfamiliar, CRM software is used by consumer-facing businesses to increase sales from existing customers. The goal is to improve existing customer relationships by resolving issues quickly, performing predictive analytics to determine which customers might purchase a new product or service, or relying on CRM for online marketing campaigns.
Salesforce is the CRM kingpin. According to an IDC report, Salesforce accounted for almost 24% of global CRM spend in 2021 and has steadily increased its share in each of the last five years. Similar to Amazon’s dominance, Salesforce owns a larger CRM share than its four closest competitors combined. This makes it very unlikely to be dethroned as No. 1 in this sustained double-digit opportunity any time soon.
As I pointed this out recently, Salesforce has done an excellent job of incorporating inorganic growth into its winning formula. Co-Founder and Co-CEO Marc Benioff has overseen acquisitions of MuleSoft, Tableau Software, and Slack Technologies, among others. These deals provide new revenue channels and cross-selling opportunities, and help expand the Salesforce ecosystem.
If Salesforce can meet Benioff’s goal of $50 billion in full-year sales by fiscal 2026 (calendar year 2025), it will be an incredible bargain for investors buying at today’s share price.