If 2020 has taught Wall Street and investors anything -- aside from the fact that stock market crashes are an inevitable part of the investing process -- it's that staying the course with great companies is a smart move.
Uncertainty tied to the unprecedented coronavirus disease 2019 (COVID-19) pandemic initially sent the benchmark S&P 500 screaming lower by 34% in a matter of 33 calendar days. However, it only took 11 weeks for the broad-based index to regain approximately 80% of what it lost, with the tech-heavy Nasdaq Composite pushing to a new all-time high. While there's no question that the stock market and U.S. economy aren't always linked at the hip, there's clear value in thinking long-term and buying rock-solid growth stocks with a time-tested track record during periods of panic.
When the next stock market crash does strike, here are three rock-solid growth stocks you'd be wise to own.
Even though social media giant Facebook (META 0.07%) is an ad-driven business, and every previous recession has shown a short-term pullback in ad-spending by businesses, ignoring its social dominance because of a quarter or two of ad instability would be a big mistake.
Facebook ended its most recent quarter with a whopping 2.6 billion monthly active users and 2.99 billion family monthly active people. This latter figure takes into account the unique eyeballs Facebook generates from all of its social platforms. To put this into perspective, 33% of the global population uses Facebook each month, with 38% of the world logging onto a Facebook-owned social platform each month. That's incredible! It's also a ton of targeted eyeballs that advertisers will pay out the nose to reach.
Plus, as I've alluded, Facebook has a family of products that extends beyond just its most popular platform. In addition to social website Facebook, it owns Instagram, WhatsApp, and Facebook Messenger, which combine as four of the top seven most-visited sites in the world (not in the order I've presented them). Of these sites, just Facebook and Instagram are being significantly monetized. Facebook has only begun scratching the surface on how it'll generate growth from WhatsApp and Facebook Messenger.
Because Facebook remains in the relatively early innings of its monetization of these assets, a double-digit growth rate appears sustainable for a long time to come.
Another rock-solid growth stock to add to your shopping list when the stock market crashes is chipmaker Broadcom (AVGO -1.09%). Again, while consumption habits might remain a bit choppy for a few quarters during a recession, Broadcom has all the tools necessary to thrive.
Easily the biggest catalyst for the company is the ongoing rollout of 5G networks. We're talking about the first real upgrade to wireless infrastructure in about a decade -- and this rollout isn't going to happen overnight. This benefits Broadcom in a big way since it generates in the neighborhood of three-quarters of its revenue from wireless chips and other solutions used in smartphones. And this won't be a one-year bump in sales for Broadcom from 5G. Rather, it'll likely see a multiyear technology upgrade cycle that'll drive strong demand for its smartphone solutions.
The other factor that's going to fuel Broadcom's double-digit earnings growth is the ongoing move by enterprises into the cloud. Although Broadcom provides infrastructure solutions for a variety of industries, its role in manufacturing connectivity and access chips associated with data centers should play a key role in its growth throughout this decade. The COVID-19 pandemic is only accelerating this work-from-home trend and will likely coerce businesses to spend aggressively on beefing up their data centers.
And just in case this wasn't enough to convince investors of how rock-solid an investment Broadcom is, the company has grown its quarterly dividend by more than 4,500% to $3.25 a share over the past 10 years.
Investors are also encouraged to look toward the healthcare sector to find growth and stability during stock market plunges. In particular, rare-disease drug developer Alexion Pharmaceuticals (ALXN) looks to be the perfect addition for long-term investors.
One clear differentiating factor between Alexion and most other drug developers is this focus on rare diseases. For Alexion, it's tackling what might be referred to as ultra-rare indications. Though there's plenty of risk involved in targeting small patient pools, a successful therapy in an ultra-rare disease can become a cash cow for a drug developer. Typically, insurers will have little choice but to cover a U.S. Food and Drug Administration-approved therapy, and competition is often nonexistent. It's this formula that allowed rare-disease drug Soliris, at one time the most-expensive drug in the U.S., to grow into blockbuster status.
But what's most exciting about Alexion isn't necessarily Soliris' potential. Instead, it's the opportunity for successor drug Ultomiris. Wall Street had been concerned that an eventual loss of patent exclusivity for Soliris could expose Alexion's lead drug to generic competition. Thus entered Ultomiris, stage left. Ultomiris is a recycled protein that only needs to be injected every eight weeks, which compares to every two weeks for Soliris, meaning it'll likely stomp out any generic Soliris challenger with ease due to improved patient quality of life. Put another way, Ultomiris just gave Alexion a new lease on its cash flow for probably another decade, if not longer.
Despite low-double-digit sales growth potential, Alexion is currently valued at less than 10 times Wall Street's forecast earnings for 2021. That makes it one heck of a bargain growth stock to scoop up on any major pullbacks in the stock market.