Despite what 2021 might have you believe, the market does not climb in a straight line. Since the first week of January, it has hit its highest indoor rating of all time S&P 500 yielded a peak drop of 28%. To make matters worse, the bond market is having its worst year on record.
But things have gotten even worse for the tech-driven Nasdaq Composite (^IXIC Legal interest 1.28%), which has plunged firmly into a bear market with a peak decline of 38% in less than a year. When uncertainty arises, it’s not uncommon for companies that sport high value premiums to take it on the chin.
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However, there is opportunity in it. Just as optimism during long-term peak markets can cause equity values to soar, pessimism during bear markets has also been known to create amazing buying opportunities for sick investors. Below are five awesome growth stocks you’ll regret not buying during the Nasdaq bear market downturn.
Amazon
Early growth stock investors will regret not jumping into a FAANG giant during a bear market downturn Amazon (AMZN System efficiency 1.88%). Although Amazon’s retail division faces all kinds of headwinds as the possibility of a U.S. recession grows, the company’s top-performing divisions are firing on all cylinders.
Amazon’s reputation has long dominated its online marketplace. The company’s 14 closest competitors don’t even come close to the U.S. online retail market share that Amazon is pulling away from on its own. However, online retail sales generate very low margins. This means that Amazon’s primary revenue driver does not play a significant role in generating operating cash flow.
The key for Amazon is that its top three Amazon Web Services (AWS), subscription services, and advertising services continue to grow. AWS is the world’s leading provider of cloud infrastructure services, and enterprise cloud spending is, of course, still in its infancy. Meanwhile, the company has used the popularity of its online marketplace as a catalyst to sign up more than 200 million Prime members worldwide. All three of these higher operating segments continue to grow sales at a double-digit rate.
Because Amazon is a company that reinvests most or all of its operating cash flow, it pays to hold on to the company’s earnings multiple. Throughout 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 cash flow forecast for the company in 2025. That’s cheap for such a game-changing company.
Lovesac
The second phenomenal growth stock to buy when the Nasdaq is down is furniture stocks Lovesac (IN LOVE Legal interest 2.54%). Although Wall Street has been pummeling the stock over rising inventory levels, all signs and innovations continue to point to Lovesac as a long-term winner.
The main thing investors get with Lovesac is differentiation. Traditional furniture retailers rely on physical stores and purchase their products from a small number of wholesalers. Lovesac, meanwhile, generates about 88% of net sales from “sactionals,” which are modular beds that can be rearranged in dozens of ways to fit most living spaces. Sactionals come with over 200 cover options, can be ordered with many high-margin add-ons (e.g., surround-sound systems), and the liners used in these covers come entirely from recycled plastic water bottles. make out. No other furniture store can match the functionality and eco-friendliness of Lovesac furniture.
Plus, Lovesac’s more refined price points target a more affluent customer. This makes it less likely that the company will be negatively affected by a small economic downturn and rapidly increasing inflation.
Another notable catalyst is Lovesac’s omnichannel retail platform. During the pandemic, it was able to shift almost half of its sales online. Having multiple ways to sell its products beyond physical stores has helped keep its overhead costs down and has driven the company to profitability well ahead of Wall Street’s expectations.
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Broadcom
The third awesome growth stock you’ll regret not buying during the Nasdaq bear market downturn is semiconductor stock. Broadcom (AVGO Legal interest 4.77%). Although cyclical stocks like Broadcom are almost always susceptible to economic weakness, Broadcom has several factors that should help it weather a possible downturn better than its peers.
The primary growth driver for Broadcom is the ongoing transition to 5G wireless infrastructure. It’s been nearly a decade since telecom providers upgraded their wireless infrastructure to support faster download speeds. The transition to 5G should entice businesses and consumers to trade in their older devices to take advantage of higher download speeds. Broadcom makes most of its revenue from wireless chips and accessories used in next-generation phones.
Another reason investors can trust Broadcom is the company’s historical past performance. The company entered 2022 with $14.9 billion in orders to fulfill and, according to CEO Hock Tan, booked well into 2023. If chip demand slows, Broadcom has significant leverage thanks to its backlog.
There are also exciting opportunities for Broadcom beyond its bread-and-butter smartphone division. For example, the pandemic has accelerated the pace at which businesses are moving data into the cloud. It should continue to demand anything and everything related to data centers. Broadcom is a manufacturer of connectors and access chips used in data center servers.
Cresco Labs
The marijuana company of the United States Cresco Labs (CRLBF Legal interest 1.26%) The fourth is a stellar growth stock that you’ll kick yourself for not buying during the Nasdaq bear market downturn. Even with cannabis reform legislation pending on Capitol Hill, multiple state-level legalizations provide more than enough catalysts for multi-state operators (MSOs) like Cresco.
As of mid-October, Cresco had 54 operating dispensaries in 10 states. Although it has established a large presence in Florida where medical marijuana is legal (20 dispensaries and counting), Cresco’s strategy of targeting states with limited licenses, such as Illinois, Ohio, Pennsylvania, and Massachusetts, has been smart. Limited license states intentionally limit the number of retail licenses that can be issued at all, as well as to a single business. In other words, these are the states where up-and-comers like Cresco Labs have a fair shot at building their brands and gaining a loyal following.
To build on this point, Cresco is close to closing a big-time acquisition. He buys the MSO Care of Columbia in an all-share agreement that will increase the combined company’s operating pharmacies to more than 130 and expand its presence in 18 states.
However, it’s Cresco’s cannabis operations that really help it survive in an increasingly crowded cannabis market. Although cannabis as a whole generates less margin than retail sales, Cresco has a margin on its side. It holds a successful cannabis distribution license in California and can place its proprietary brands in more than 575 retail locations. The Golden State is the nation’s largest weed market by annual sales.
Salesforce
The fifth impressive growth stock you’ll regret not buying during the Nasdaq bear market downturn is the cloud-based customer relationship management (CRM) software provider. Salesforce (CRM -4.48%). Although rapidly rising interest rates weigh on the macro growth prospects for the US economy, Salesforce’s competitive advantages make it a compelling buy following its massive recession.
For those unfamiliar, CRM software is used by customer-facing businesses to increase sales from existing customers. The goal is to strengthen existing customer relationships by quickly solving problems, conducting predictive analysis to determine which customers are likely to purchase a new product or service, or rely on CRM for online marketing campaigns.
Salesforce is the king of CRM. According to an IDC report, Salesforce will account for 24 percent of global CRM spending in 2021, and its share has been growing steadily over the past five years. Similar to Amazon’s dominance, Salesforce has more CRM share than its four closest competitors combined. This makes it highly unlikely that he will be dethroned as the No. 1 player in this persistent double-digit opportunity anytime soon.
As I noted recently, Salesforce has done a neat job of incorporating inorganic growth into its formula for success. Co-founder and co-CEO Marc Benioff has overseen the 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 reach 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.
