Nasdaq Sell-Off: 3 Growth Stocks You May Regret Not Buying on the Dip

There’s no sugarcoating it: Times are tough in the stock market. Inflation is high; there’s talk of a coming recession. The Dow Jones Industrial Average, the Nasdaq Composite, and the S&P 500 are down 15%, 30%, and 21%, respectively, at he halfway point of the year. 

All of this can seem frightening, but bear markets are as natural as the seasons. They come and go. And every prior bear market has eventually been followed by a bull market that overtook the prior high.

For investors who are willing to buy and hold, bear markets can be something of a blessing. They provide time to accumulate shares at reasonable prices. Moreover, they’re indiscriminate, knocking down share prices regardless of whether a company is fundamentally sound or not.

So let’s look at three growth stocks that you might regret not buying in this bear market.

1. Microsoft

If you had invested $10,000 in Microsoft (NASDAQ: MSFT) three years ago, you would be sitting on over $19,400 today. Nevertheless, the software maker has not been immune to this year’s turmoil, with shares down 23% year to date.

However, in Microsoft’s case, I would lay the blame squarely on the market; the company appears to be executing quite well. Over the last four quarters, it has beaten the consensus earnings-per-share (EPS) estimates each time — ranging from a high beat of $0.25 to a low of $0.04. Moreover, Wall Street expects full-year 2022 EPS of $9.30, up from $8.05 a year earlier. Similarly, analysts predict Microsoft should grow revenue by about 16% annually for the next five years.

What’s more, Microsoft has one of its industry’s best returns on equity (ROE), which is calculated by dividing net profits by shareholder’s equity. In other words, how much profit does $1 of shareholder capital return in profits over a given year? Microsoft’s ROE is 48.2% — meaning each dollar of shareholder capital results in roughly $0.48 in profit. This impressive ROE outpaces many megacap software peers like Alphabet (30.6%) and Meta Platforms (28.6%).

MSFT return on equity. Data by YCharts.

Bear markets tend to lower all boats, even powerhouses like Microsoft. Investors might be wise to buy the dip now and stave off regret later.

2. CrowdStrike Holdings

The second Nasdaq stock I want to buy on the dip is CrowdStrike Holdings (NASDAQ: CRWD). This company sits at the intersection of two of the biggest secular growth stories: cybersecurity and cloud-based software. CrowdStrike sells modules that monitor, detect, and disable cyberattacks. The company relies on artificial intelligence to monitor its customers’ electronic assets and check for unusual activity.

Ransomware and other forms of cybercrime are some of the costliest problems organizations face today. A report from Cisco/Cybersecurity Ventures estimates that the total cost of cybercrime will rise to over $10 trillion by 2025. So CrowdStrike will have a significant total addressable market in the coming years.

The company is already seeing massive revenue growth, with year-over-year sales jumping 61% in the most recent quarter. What’s more, Wall Street is raising its earnings estimates for CrowdStrike, despite growing signs of an impending recession. Of the 32 analysts covering the stock, 31 rate it as a buy or strong buy, and I agree. It’s a name I want to buy on any weakness.

3. Lululemon Athletica

Lululemon Athletica (NASDAQ: LULU) rounds out my list of growth stocks to buy. The athleisure-focused brand is a powerhouse with revenue growth of 31.6% in its latest quarterly results. The company began with a focus on women’s yoga apparel but in recent years has branched out to menswear and footwear.

Lululemon operates an e-commerce segment and brick-and-mortar stores, which can be found across the United States, Canada, United Kingdom, South Korea, and China, among other locations.

With operating margins of 21.6%, Lululemon is well ahead of competitors like Nike (14.3%) and Addidas (8.2%). And its status as a premium brand gives it pricing power that has endured as pandemic restrictions have eased and workers have increasingly returned to the office. 

Nonetheless, shares are down 27.7% year to date. Perhaps you should consider it an opportunity. I’m eager to buy Lululemon on every dip.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Alphabet (C shares), CrowdStrike Holdings, Inc., and Lululemon Athletica. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Cisco Systems, CrowdStrike Holdings, Inc., Lululemon Athletica, Meta Platforms, Inc., Microsoft, and Nike. The Motley Fool has a disclosure policy.

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