It’s been a tough year for Wall Street and investors. Over the past four and a half months, the benchmark S&P500 and iconic Dow Jones Industrial Average both have officially entered correction territory with declines of at least 10%.
Meanwhile, things have been much worse for growth-oriented stocks Nasdaq Compound (^IXIC -0.30%), which fell nearly 30% peak to peak between its all-time high in mid-November and its recent low. This puts the Nasdaq squarely in a bear market.
While the speed of bearish moves during a bear market can be unsettling, history has shown time and time again that these declines are the perfect time for opportunistic investors to pounce. Every notable decline in major indices – including the Nasdaq Composite – was eventually erased by a bullish rally.
Right now, some of the most attractive bargains are in growth stocks. Below are four phenomenal growth stocks you’ll regret not buying during this Nasdaq bear market decline.
The first phenomenal growth stock to engulf the Nasdaq losing more than a quarter of its value is the social media company pinterest (PINS -0.99%).
There seem to be two main Wall Street concerns with the once high-flying Pinterest. First, the company’s monthly active users (MAUs) have shrunk by 45 million over the past year. User growth is generally considered a key engagement metric for social media actions. And second, we worry about how AppleiOS privacy changes could affect businesses that depend on ad revenue, such as Pinterest.
But as I said in March, none of these issues are with Pinterest.
The company’s MAU decline can be explained by rising vaccination rates and people returning to some semblance of normal (and spending less time online). Far more importantly, Pinterest had no trouble monetizing its 433 million MAUs. Despite a 9% year-over-year decline in MAU, the global average revenue per user jumped 28%! This is clear proof that marketers are willing to pay to reach Pinterest users.
Plus, Pinterest’s entire platform is built around the idea that users publicly share the things, places, and services that interest them. Its MAUs give marketers all the tools they need for targeted advertising, which makes Apple’s iOS privacy changes a moot point.
Another incredible growth stock with a rich history of delivering to its shareholders is the payment processing leader Visa (V 0.84%).
The reason Visa shares are about 20% lower at their 52-week high has to do with the growing likelihood of a recession hitting U.S. and/or global markets. This is generally bad news for a cyclical business dependent on consumer and business spending. However, this concern overlooks Visa’s many competitive advantages.
For starters, being cyclical is not a bad thing. Although recessions are inevitable, they usually last only a few quarters. In comparison, periods of expansion are often measured in years. Thus, Visa is a company that allows patient investors to benefit from the natural expansion of the US and global economy over time.
It is also a company that does not lend. Sticking strictly to payment processing means the business doesn’t have to worry about loan defaults/losses during recessions. Not having to set aside capital for losses is one of the main reasons why Visa’s profit margin is consistently above 50%.
One final point: Visa has the majority share (54%) of the credit card network’s purchase volume in the United States, the world’s largest consumer market. It’s a buy without fuss over any material weakness.
Adtech Small Cap Stock PubMatic (PUBM 1.32%) is another phenomenal growth stock that investors can confidently add to their portfolios.
With inflation soaring and the Federal Reserve stomping on the proverbial brakes via interest rate hikes, there are fears that a recession in the United States could lead to a noticeable decline in corporate advertising spending. That wouldn’t be ideal for a sell-side platform that helps publishing houses sell their digital signage space.
But as with the other companies on this list, worries surrounding PubMatic’s near-term future seem totally overblown. For example, even with a US gross domestic product of 1.4% in the first quarter, PubMatic’s revenue jumped 25% from the year-ago period. As companies shift their advertising spend from print to digital, PubMatic has a very good chance of doubling the global digital advertising growth rate by just over 10% per year.
Another thing to note about PubMatic is that the company has designed and built its cloud-based infrastructure. Not having to rely on third parties in the programmatic advertising space is a huge advantage that will allow PubMatic to recognize greater efficiency as it scales. Or, in simpler terms, it should show higher margins as its revenue grows.
With a sustained growth rate of around 25% and a P/E ratio of just 22 for the year ahead, PubMatic looks like a gaudy bargain.
Finally, the FAANG stock Alphabet (GOOGL -1.34%)(GOOG -1.29%) is a phenomenal, fast-paced stock that can make patient investors much richer.
As with the other companies on this list, the prospect of a recession is great. A significant part of Alphabet’s business – Alphabet is the parent company of internet search engine Google and streaming platform YouTube – relies on advertising. As noted, marketers tend to reduce their advertising when the economy contracts.
However, Alphabet is not your ordinary ad agency. For example, Google has consistently controlled between 91% and 93% of global Internet search over the past two years. With a true monopoly on search, Alphabet’s Google is able to wield impressive advertising pricing power. Unsurprisingly, this is a segment that almost always grows by double digit percentages.
But Alphabet isn’t just about Google these days. YouTube has become one of the most visited social sites on the planet and accounts for more than 10% of Alphabet’s revenue. Meanwhile, Google Cloud is the #3 global cloud infrastructure service provider, based on spend. Google Cloud has maintained a sales growth rate of 45% (or more) and should be a major margin driver for Alphabet by mid-decade at the latest.