The past year has been a day and night difference for Wall Street. A year ago, historically low interest rates fueled a boom in growth stocks that seemed to have no end in sight, and growth Nasdaq Compound (^IXIC -0.18%) hit a new all-time high above 16,000. Today, the Nasdaq is mired in a bear market thanks to the Federal Reserve raising interest rates at its fastest pace in decades.
While no doubt a 38% peak drop in the Nasdaq Composite tested the conviction of growth stock investors, it also rolled out the red carpet for those with cash on hand. and a long-term mentality. After all, every correction, crash, and bear market in the Nasdaq Composite throughout history has ultimately been erased by a bull market rally.
The 2022 Nasdaq bear market is a particularly good time to go bargain hunting for top growth stocks. Below are five impressive growth stocks you’ll regret not buying during the Nasdaq bear market decline.
The first impressive growth stock you’ll regret not buying during the Nasdaq bear market decline is Alphabet (GOOGL -0.55%) (GOOG -0.44%), the parent company of YouTube, Waymo and the Internet search engine Google. Despite potentially weak ad spend in the near term, Alphabet has unrivaled competitive advantages that should greatly enrich its patient shareholders over time.
Alphabet’s cash cow remains Google. Although Internet search revenues fluctuate with the health of the US and global economy, periods of economic expansion last considerably longer than recessions. Given that Google has accounted for at least 91% of the global internet search share for more than two years, advertisers are likely to enjoy superior pricing power for a long time to come.
Equally important to Google is what Alphabet does with the money it generates from its main search engine. Part of this capital is invested in the YouTube streaming platform, which is now the second most visited social site in the world. Monetizing YouTube Shorts is just one of the many ways Alphabet aims to move the needle for one of its most valuable assets.
Additionally, Google Cloud was responsible for 9% of global spending on cloud services during the third quarter, according to Canalys estimates. Google Cloud’s market share is growing, and by the middle of the decade, this segment could well become one of Alphabet’s biggest cash drivers.
A second top growth stock that you will blame yourself for not buying at a huge discount is the cybersecurity company Okta (OKTA -3.48%). Although larger losses associated with its acquisition of Auth0 stick out like a sore thumb in a bear market, Okta has put the pieces of the puzzle in place to become a major player in the identity verification space.
Okta’s biggest benefit may well be the evolution of the cybersecurity industry. Over the past quarter century, protecting sensitive information from hackers and bots has gone from a luxury to a necessity for businesses of all sizes in any economic environment. This means that cybersecurity solutions are just as important in a bear market as they are in endless bull markets.
Okta’s identity verification advantage is its cloud-native, AI-powered platform. Because it was built in the cloud and powered by AI, Okta’s identity platform is uniquely positioned to recognize threats faster and more effectively, as well as ensure that only authorized people have access to certain data.
The Auth0 takeover will also be helpful for Okta, although integration issues and stock compensation have increased the company’s short-term losses. Not only does Auth0 expand Okta’s service offerings and customer base, it provides a path to expand internationally, which will be critical if Okta can sustain double-digit growth for years to come.
The third impressive growth stock you’ll regret not adding during the Nasdaq bear market decline is the developer of robotic-assisted surgical systems Intuitive surgery (ISRG -0.82%). Despite the COVID-19 pandemic and economic weakness in the United States forcing some patients to postpone certain elective surgeries, this is a company with definite operational advantages.
For starters, Intuitive Surgical has installed more than 7,300 of its da Vinci Surgical Systems in hospitals and surgical centers around the world. Nominally, that might not seem like a big number, but it’s considerably more than all of the company’s peers.
To add to this point, da Vinci surgical systems cost between $0.5 and $2.5 million and require surgeons to be trained in their use. The nominal and intangible investments required to purchase a da Vinci Surgical System make it highly unlikely that buyers will ever switch to a competing platform. In other words, Intuitive Surgical customers tend to stay customers for a long time.
But it’s the company’s razor and blade operating model that really makes it an enticing investment. Although its da Vinci systems are expensive, they are expensive to build and do not generate the best margins. However, they keep customers coming back for the instruments at every procedure and for regular maintenance needs. Over time, the higher margin instruments and service segments have become Intuitive Surgical’s primary revenue drivers.
A fourth surefire growth stock you’ll regret not buying as the Nasdaq plunges is the US marijuana stock. Cresco Laboratories (CRLBF 7.04%). Even though Capitol Hill has struggled to pass cannabis reform measures, a significant number of state-level legalizations have rolled out the red carpet for companies like Cresco to succeed.
By the end of September, Cresco Labs had 54 operating dispensaries in 10 legalized states. While some of these dispensaries were located in high-dollar markets, such as California, it’s Cresco’s push into limited license markets that should raise eyebrows. Markets where licensing is deliberately restricted by state regulators should help ensure that Cresco is able to build brand value and build customer loyalty.
To build on the above, Cresco Labs is also nearing the finish line of its large Multistate Operator (MSO) acquisition. Care British Columbia. Although the two companies are divesting about a dozen dispensaries and treatment sites combined in order to satisfy regulators and complete the deal, it will still be one of the largest MSOs in the country. In total, the new Cresco will have more than 100 operating dispensaries in 18 states.
A final differentiator for Cresco Labs is its wholesale cannabis business. Most people overlook wholesale weed because the margins are significantly lower compared to the retail side of the business. However, Cresco holds a lucrative cannabis distribution license in California and therefore has a big volume advantage in its sails. He is able to place his exclusive products in more than 575 dispensaries across the Golden State.
The fifth impressive growth stock you will regret not buying during the Nasdaq bear market decline is that of Warren Buffett. Berkshire Hathaway (BRK.A 0.07%) (BRK.B 0.10%).
What is Berkshire doing on a list of growth stocks, you ask? What if I told you that Buffett’s company has consistently grown its revenue by high single-digits or low double-digits, with solid double-digit earnings growth? It may not be an innovator like Intuitive Surgical or an industry leader like Alphabet, but it is a growing company and has been for over five decades.
Warren Buffett’s love of dividend-paying stocks is one of the reasons Berkshire has performed so well. Companies that pay a regular dividend have historically outperformed non-dividend paying stocks by a considerable amount. Over the next 12 months, Berkshire Hathaway is expected to collect more than $6 billion in dividend income, including preferred stock payments.
Another big key to Berkshire Hathaway’s success was Warren Buffett and his investment team who built the company’s investment portfolio and assets with cyclical companies. As I noted earlier with Alphabet, periods of economic expansion usually last for years, while recessions often end in a few quarters. Buffett has positioned Berkshire to capitalize on these long periods of success, particularly with respect to Berkshire’s technology and financial holdings.
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