Regardless of whether you’ve been invested in the stock market for decades or have only recently begun putting your money to work on Wall Street, it’s been a challenging year. The S&P 500‘s first-half return was its worst in more than a half-century.
Meanwhile, things have been even more difficult for the growth-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC). Since hitting its record-closing high in mid-November, the Nasdaq has plunged by as much as 34%. Even with a modest rebound from its lows, the index is firmly entrenched in a bear market.
But there’s an interesting fact about bear markets that all patient investors should know. Namely, every bear market decline and stock market correction throughout history has eventually been wiped away by a bull market rally. This means all sizable declines in the major U.S. indexes, including the growth-driven Nasdaq Composite, are opportunities for long-term investors to pounce.
At the moment, growth stocks offer some of the most attractive valuations on Wall Street. What follows are five fantastic growth stocks you’ll regret not buying during the current Nasdaq bear market dip.
The first phenomenal growth stock you’ll be kicking yourself over if you don’t scoop it up on the Nasdaq bear market decline is China-based electric vehicle (EV) manufacturer Nio (NYSE: NIO). Although auto stocks are contending with a flurry of semiconductor chip and parts shortages tied to the COVID-19 pandemic, these are short-term concerns that don’t alter Nio’s long-term growth trajectory.
We’ve already been given a brief glimpse of the company’s ability to ramp its production. In June and July, Nio delivered 12,961 EVs and 10,052 EVs, respectively. Prior to the pandemic throwing a monkey wrench into domestic supply chains, Nio’s management team believed it would hit an annual run-rate of 600,000 EVs (50,000 EVs/month) by the end of the year. Once part availability improves, little will stand in the way of Nio’s expansion.
Investors should also appreciate the company’s innovation, which can be seen on multiple fronts. Nio has regularly introduced new vehicles to its lineup to broaden its appeal to domestic EV buyers. The ET7 sedan, which began deliveries in late March, and the ET5 sedan, which is expected to be delivered to customers in September, can travel 621 miles on a single charge with the top battery upgrade.
There’s also Nio’s battery-as-a-service (BaaS) subscription, which it introduced in August 2020. With BaaS, buyers receive a discount off the purchase price of their EV, and can charge, swap, and upgrade their batteries at a later date. For Nio, the benefit is high-margin monthly subscription revenue and the loyalty of early buyers.
If somewhat off-the-radar growth companies are your thing, biotech stock Exelixis (NASDAQ: EXEL) represents the perfect buy following the Nasdaq bear market dip.
If there’s one great thing about healthcare stocks, it’s that they’re defensive. No matter how poorly the U.S. economy or stock market perform, or how high inflation flies, patients will continue to need prescription drugs, medical devices, and healthcare services. This puts a pretty safe floor beneath drug stocks like Exelixis.
What makes this cancer-drug developer so special is its blockbuster drug Cabometyx. Cabometyx is approved to treat first- and second-line renal cell carcinoma, as well as advanced hepatocellular carcinoma that’s previously been treated. These indications alone offer more than $1 billion in annual sales potential. But with somewhere in the neighborhood of six dozen clinical studies ongoing to assess Cabometyx as a monotherapy or combination therapy in an assortment of cancer types, label expansion is a very real possibility.
What’s more, Exelixis is swimming with cash. It ended March with approximately $2 billion in cash, cash equivalents, and restricted cash equivalents and investments. Having so much capital on hand has allowed the company to reignite its internal research engine, and fund numerous drug-development partnerships.
A third fantastic growth stock that’s begging to be bought, and which you’ll regret not buying while it’s down, is payment processor Visa (NYSE: V). Although financial stocks usually take it on the chin during periods of economic weakness, Visa has sustainable competitive advantages that minimize its struggles.
On a macro basis, Visa and its peers benefit from the disproportionate amount of time the U.S. economy spends expanding. Even though recessions are inevitable, they don’t last very long. If Visa shareholders are patient, they can take advantage of the natural expansion of the U.S. and global economy over time.
On a company-specific basis, Visa is the most dominant player in the U.S. (the top market for consumption in the world). As of 2020, it held 54% of credit card network purchase volume in the U.S. — 31 percentage points higher than the next-closest competitor — and was the only payment processor to see significant share expansion after the Great Recession (2007-2009).
Visa’s growth runway is also exceptionally long. Since most global transactions are still being conducted in cash, Visa has the opportunity to acquire its way into potentially underbanked regions, as it did with the Visa Europe acquisition in 2016. Or it could choose to organically infiltrate the Middle East, Africa, and Southeastern Asia region with its payment infrastructure over time. Sustained double-digit growth should be the expectation for Visa shareholders.
The fourth growth stock that’s an amazing value during this bear market dip in the Nasdaq is U.S. marijuana stock Columbia Care (OTC: CCHWF). As you’re about to see, Columbia Care is an especially smart way to play the U.S. pot industry if you’re also bullish on multi-state operator (MSO) Cresco Labs (OTC: CRLBF).
To begin with, the U.S. cannabis industry should be booming throughout much of this decade. Cannabis research firm BDSA projects that the U.S. legal weed market will grow from the $29 billion in sales recorded in 2021 to an estimated $61 billion by 2026. That’s a compound annual growth rate of 16% for those of you keeping score at home.
As an added bonus, cannabis has acted as a nondiscretionary item throughout the COVID-19 pandemic. This means consumers are buying regardless of inflation or a deteriorating economic outlook.
What makes Columbia Care so appealing is its growth strategy and pending acquisition by Cresco Labs. With regards to the former, Columbia Care has used acquisitions to quickly broaden its retail presence. It’s become a major player in Colorado (the nation’s No. 2 weed market by annual sales), and has a footprint in most high-dollar markets.
As for the pending buyout, combining Cresco and Columbia Care will create an MSO with more than 130 operating dispensaries and a footprint in 18 states. It’ll be the leading wholesale pot company in the U.S., with a rapidly expanding (and higher-margin) retail presence. The icing on the cake is that Columbia Care is trading at an 8% discount to the all-share buyout price offered by Cresco, which represents an arbitrage opportunity for investors.
The fifth and final fantastic growth stock you’ll regret not buying on the Nasdaq bear market dip is cloud-based application monitoring and security company Datadog (NASDAQ: DDOG). Although Datadog boasts a sizable premium relative to sales and earnings per share, it’s also the fastest-growing company on this list by a considerable amount (a 74% compound annual growth rate between 2017 and 2022, based on the company’s 2022 guidance).
The reason Datadog is growing so rapidly isn’t a secret. Businesses were steadily shifting their data into the cloud prior to the pandemic. Since the COVID-19 pandemic hit, this shift has accelerated. With Datadog offering solutions that allow businesses to monitor and secure their applications, it’s perfectly positioned for what could become a sustained hybrid-work environment.
What’s arguably been most impressive with Datadog isn’t necessarily its strong customer growth. Rather, it’s been the ability of the company to generate significant organic growth from its existing clients. As of the end of March 2022, Datadog had a 19-quarter streak (three months shy of five years) of a dollar-based net retention rate of at least 130%. This means existing customers are spending an average of at least 30% more in the comparable quarter of the following year.
To add, Datadog noted at the end of 2020 that 22% of its customers were utilizing four or more products, with 3% purchasing six or more. As of the end of March 2022, 35% were using four or more products and 12% had “graduated” to six or more. It’s really a testament to Datadog growing its business from within.
With a consistently growing total addressable market and the company having decisively pushed into recurring profitability, now is the perfect time for opportunistic investors to strike.
Sean Williams has positions in Columbia Care and Exelixis. The Motley Fool has positions in and recommends Cresco Labs Inc., Datadog, Nio Inc., and Visa. The Motley Fool recommends Exelixis. The Motley Fool has a disclosure policy.