It’s been more than half a century since Wall Street and the investment community have been so roughed up. Since hitting their respective closing highs between mid-November and the first week of January, Dow Jones Industrial Averagewide seat S&P500and dependent on growth stock Nasdaq Compound (^IXIC 1.79%) dropped by 19%, 24% and 34%, respectively. You will notice that the depth of these declines places the S&P 500 and the Nasdaq firmly in a bear market.
Although bear markets can be unnerving given the speed and unpredictability of their bearish moves, they are historically the perfect time to put your money to work. After all, every noticeable drop in the broader market – including the Nasdaq Composite – was eventually erased by a bull market rally.
The current bear market is a particularly good time to buy innovative growth stocks at a discount. Below are five wonderful growth stocks you’ll regret not buying during this downturn in the bear market.
The first stellar growth stock just begging to be bought as the Nasdaq plunges into a bear market is the telehealth service provider Teladoc Health (TDOC 3.57%). Although Teladoc grossly overpaid applied health signals company Livongo Health in 2020, leading to a gigantic write-down in the first quarter of 2022, it is also perfectly positioned to benefit from a shift in how personalized care is delivered in the states. -United. .
While there’s no doubt that Teladoc has proven useful during the pandemic, the winds of change were blowing long before COVID-19 became a global issue. In the six years leading up to the pandemic, Teladoc had average annual sales growth of 74%.
The reason Teladoc is such an exciting business is that virtual visits provide benefits at every level of the healthcare treatment chain. For example, it is often more convenient for patients to have a discussion with their doctor in the comfort of their own home.
As for physicians, telemedicine offers the possibility of monitoring patients suffering from chronic diseases more closely. Regular access to patient data can allow physicians to adapt treatment plans and, ideally, improve patient outcomes. This last point is particularly important because better patient outcomes mean less money in the pockets of health insurers.
Even though Livongo has so far been a default, expect the combined company to flourish over time as cross-selling opportunities multiply.
A second wonderful growth stock that patient investors can confidently buy with the Nasdaq in a bear market is a specialized e-commerce platform Etsy (ETSY 3.47%). As the growing prospect of a US recession has hit retail stocks like Etsy, the company has more than enough sustainable competitive advantages up its sleeve to navigate this temporary weakness.
As I’ve said before, Etsy’s online marketplace is its biggest differentiator. While most online retail platforms revolve around volume, Etsy emphasizes personalization. The vast majority of its merchants are small businesses or sole proprietors who manufacture unique or custom products. While there are far bigger online retailers than Etsy, none come close to the large-scale customization they can offer.
The company has also done an amazing job of keeping users engaged. Between the end of 2019 and the end of 2021, the number of repeat buyers on the platform more than tripled. A “regular buyer” is defined as someone who makes at least six separate purchases within a 12 month period totaling at least $200 in total. Growth in repeat buyers is what allows Etsy to charge merchants more for its marketplace and analytics services.
A third superb growth stock you won’t regret buying as the Nasdaq plunges into a bear market is the power of digital payments. To block (SQ 5.70%). Although the growth of digital payments could slow in the very short term if the US enters a recession, Block’s multiple long-term growth channels make it a superstar.
For more than a decade, the Square ecosystem has been the foundation of Block. It is the segment that provides point of sale solutions, analytics and loans to merchants to help them succeed. Over the past decade, gross payment volume (GPV) flowing through the Square ecosystem has grown from $6.5 billion at an annual rate of $158 billion, based on $39.5 billion in first quarter 2022 GPV.
The beauty of the Square ecosystem is that Block merchants are getting bigger and thriving over time. Since it is primarily a merchant fee driven operating segment, larger companies are expected to generate higher gross profits.
But in the long run, peer-to-peer digital payment platform Cash App is Block’s main growth driver. The number of active monthly users of Cash App has grown from 7 million to 44 million in the north in four years (ending December 31, 2021). And the gross profit per user transacting monthly far exceeds the costs of acquiring a new customer. Cash App should soon become Block’s cash cow.
Innovative industrial properties
Another outstanding growth stock you’ll regret not buying during the Nasdaq bear market decline is the cannabis-focused real estate investment trust (REIT). Innovative industrial properties (IIPR -13.98%). Even though Congress failed to pass the marijuana reforms at the federal level, innovative industrial properties grew rapidly.
At the end of June, IIP, as the company is more commonly known, owned 111 properties covering 8.6 million square feet of rental space in 19 legalized states. What’s great about the cannabis REIT operating model is that IIP’s operating cash flows are transparent and predictable. Earlier this year, the company noted that the weighted average remaining lease term on its properties was over 16 years.
In addition to steady cash flow from its numerous cultivation and processing facility acquisitions, IIP is bringing modest organic growth to the table. Each year, it passes on inflationary rent increases to its tenants and collects a property management fee tied to the annual base rent.
Investors might also be surprised to learn that Congress’ inaction on federal weed reform is actually helping innovative industrial properties. Since access to basic banking services can be limited for pot stocks, many have used IIP’s leaseback program. Under this model, IIP acquires cannabis-focused properties for cash and leases them to the seller. It’s a win for everyone involved, with the seller recouping much-needed cash and IIP securing a long-term tenant.
The fifth and final wonderful growth stock you’ll regret not buying during the Nasdaq bear market is the cybersecurity company CrowdStrike Holdings (CRWD 2.98%). Although companies with premium valuations were hit hard in the first half of 2022, CrowdStrike demonstrated that its premium is well deserved.
For starters, cybersecurity has become a fundamental necessity for businesses over the past two decades. No matter how poorly the stock market and/or the US economy performs, bots and hackers don’t stop trying to steal company and customer data. This provides a baseline level of demand for cybersecurity stocks in virtually any economic environment.
What really sets CrowdStrike apart is its cloud-native security platform, known as Falcon, which leverages artificial intelligence to become more efficient at detecting and responding to potential threats. On a typical day, CrowdStrike monitors approximately 1 trillion events for its end users. While it’s not the cheapest end-user security solution, the company’s persistent gross retention rate of around 98% suggests it’s easily one of the best. most effective.
But the most telling measure of CrowdStrike’s success has been its ability to entice existing customers to spend more. In just over five years, the percentage of customers with four or more cloud module subscriptions has grown from 9% to 71%. This high-margin, subscription-driven operating model should keep CrowdStrike rolling in the dough for a long time.