Wall Street has an amazing track record of making patient investors wealthy over numerous decades. Forecasting directional changes in the main indices, on the other hand, is a coin flip over shorter time frames.
Since the start of the decade, the main stock indexes have bounced between bear and bull markets, with the growth-oriented Nasdaq Composite (NASDAQINDEX: IXIC) seeing the most extreme swings. Following a 21% rise in 2021, the highly monitored Nasdaq fell 33% during the 2022 bear market. As of October 4, it has increased by 26% this year.
Despite this significant outperformance in the first nine months and change of 2023, the Nasdaq Composite is still approximately 18% behind its all-time high, which was established in November 2021. While this dip may be upsetting for short-term traders, it is an excellent chance for long-term investors to buy industry-leading growth firms at a discount. With the exception of the 2022 bad market, every big downturn in history has been followed by a bull market rally.
Here are four second-to-none growth stocks you’ll be sorry you didn’t purchase after the Nasdaq bear market plunge.
Alphabet
Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), the parent company of internet search engine Google, autonomous-vehicle company Waymo, as well as a streaming website YouTube, among other companies, is the first unparalleled growth company you can purchase with confidence when the Nasdaq Composite is still way below its record-breaking high.
Though the likelihood of economic slowdown in the United States poses a risk to advertising-driven enterprises, Alphabet has a numbers game working in its favor. Despite the fact that recessions are a regular and unavoidable component of the economic cycle, times of growth are known to endure far longer. This implies that Alphabet will have great ad-pricing power more frequently than not.
What makes it so dominating is Google, its online search engine, which accounted for 91.6% of the global internet search market in September, according to GlobalStats statistics. In addition, since April 2015, it has dominated at least 90% of worldwide internet searches. Alphabet, as the undisputed leader in search, should have little issue increasing ad revenue and producing massive amounts of operational cash flow.
According to DataReportal, the business also controls YouTube, the world’s second most-visited social network, with more than 2.5 billion monthly active users. The introduction of Shorts (short-form films lasting less than 60 seconds) has given Alphabet yet another excellent potential to make big ad income.
It also runs Google Cloud, the world’s third-largest cloud infrastructure provider. Enterprise cloud expenditure appears to be in its early stages, positioning Google Cloud, which is currently profitable, to be a big cash-flow generator in the second half of the decade.
Fiverr International
Following the Nasdaq bear market fall, the next second-to-none growth stock you’ll regret not buying is Fiverr International (NYSE: FVRR). Despite concerns about the US economy, this internet services industry offers three distinct benefits.
For starters, the epidemic has radically transformed the job economy. While some employees have returned to the workplace, more people than ever before are working remotely. This is an excellent step for Fiverr, whose web marketplace connects freelancers with businesses.
The second is Fiverr’s online marketplace for services. While most of its rivals enable freelancers to charge an hourly fee for their services, Fiverr freelancers advertise their work at an all-inclusive pricing. This level of pricing transparency is unparalleled, and employers on the site appear to value it. Despite a hard economy, Fiverr spending per customer has continued to rise.
The third (and most important) feature of Fiverr is its take rate, which is the proportion of each negotiated contract that it gets to retain, including fees. Its take rate of 30.7% has steadily increased and is now nearly double that of its nearest competitors. In other words, Fiverr is taking a larger cut of each transaction without alienating its freelancers or consumers.
If you need one more compelling reason to invest in Fiverr, consider the company’s valuation: The company may be purchased for a low 12 times forward-year earnings multiple.
CrowdStrike Holdings
CrowdStrike Holdings (NASDAQ: CRWD) is a third unrivaled growth investment you’ll be sorry you didn’t buy after the Nasdaq bear market dip. Concerns about a short-term downturn in the US economy should not be used to dismiss CrowdStrike’s numerous competitive advantages.
Investors should be aware that cybersecurity solutions are essentially a need for organizations operating online or in the cloud before delving into what makes it tick. Whatever the state of the US economy, businesses will need to secure sensitive information (their own and that of their customers) from hackers. In any economy, this should result in reliable cash flow for cybersecurity firms.
CrowdStrike’s cloud-native Falcon security platform, which uses artificial intelligence (AI) and machine learning to improve over time and become more effective at spotting and responding to possible end-user threats, is what sets it different. Despite being more expensive than many of its competitors, the company’s retention rate has risen to 98% as firms are ready to pay more for its premium services.
Add-on purchases demonstrate that enterprises see Falcon as a great protection platform. 63% of the company’s clients have acquired at least five cloud module subscriptions as of the end of July 2023. Not even 10% of its clients had acquired four or more cloud module subscriptions a little more than six years ago.
With current clients eager to add to their initial purchase(s), CrowdStrike’s adjusted subscription gross margin has risen to 80% for the first half of fiscal 2024 (the company’s fiscal year ends Jan. 31).
Given CrowdStrike’s outstanding growth rate, the price/earnings-to-growth (PEG) ratio of 1.4 implies the stock is currently reasonably priced.
Baidu
Baidu (NASDAQ: BIDU) is the ultimate second-to-none growth company you’ll be sorry you didn’t purchase after the Nasdaq bear market plunge. The company’s industry-leading growth and placement outweigh the additional risks associated with investing in Chinese companies.
According to GlobalStats, Baidu controlled 67.4% of the Chinese search engine market in September. With a few exceptions, the firm has maintained a market share of 60% to 80% of internet searches in China for the previous nine years. This makes it the obvious choice for marketers in the world’s second-largest economy, which should result in significant ad-pricing power.
This is also a good moment to emphasize that China’s contentious zero-COVID plan will be abandoned in December 2022, which should revive development in Baidu’s cash-cow online marketing industry. Though it will likely take a few more quarters to overcome the supply chain bottlenecks caused by the epidemic, China’s track record of better economic development provides Baidu’s search engine with a sustainable road to low-double-digit revenue growth.
This firm is powered by more than simply a search engine. Its ambitious AI investments could generate excellent profits for the rest of the decade, if not much beyond. The company’s AI Cloud business, coupled with Apollo Go, China’s leading autonomous ride-hailing service, may drive double-digit growth in Baidu’s non-online marketing revenue.
The cherry on top for Baidu is that it is extremely inexpensive given its historically high growth. Even with Wall Street’s average expectation of a near-doubling in profits per share between 2022 and 2026, the company may be acquired for less than 12 times forward-year earnings.
