It's certainly no secret the past few weeks have been rough on the market. The S&P 500 is now down 6% from its early January high, yet it remains vulnerable to more selling following the mostly unfettered gains logged in 2020 and 2021.
As the cliche goes, though, investors have thrown some babies out with the bathwater. That is to say, the profit-taking has been rather indiscriminate, dragging down some stocks that didn't deserve such a drubbing.
They'll bounce back, of course -- quality is always (eventually) reflected in a stock's price. The thing is, it just makes sense to step into the best of these names while their stock prices have yet to rally, before other investors notice and then fix their mistakes. Here's a rundown of three of the best growth stocks primed for a rebound following sizable sell-offs.
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Etsy
Amazon may be the dominant name in the e-commerce arena, but its sheer size lends itself to mass merchandising. Listings of one-of-a-kind, handmade, and vintage goods just don't work well there. Because consumers still want to buy these types of items online, Etsy (ETSY -2.35%) has stepped into the sizable niche and taken over it. The Etsy website now boasts 5.2 million active sellers serving 89.4 million active buyers; these numbers continue to move higher even after their pandemic-driven surges.
There's a reason the company has achieved this unlikely growth -- two reasons, actually.
The first of those reasons is, the company is still refining a relatively young product. In September, for instance, the company unveiled an interactive platform called The Etsy House that allows consumers to virtually browse a home featuring some of the site's best home products. In May of last year, Etsy announced a collaboration with pop-culture personality Nicole Richie, which highlights some of the star's favorite creators selling their wares on the site. These are just a couple of examples of how the company continues to widen its net by building a more engaging platform for its users.
The second reason is, as big as e-commerce has become, most shopping is still done offline. The U.S. Census Bureau reports that during the third quarter of last year, only 13% of the country's retail consumption took place online. The other 87% is still up for grabs, and consumers are still getting used to the idea of buying more than the mere basics using the internet.
Between these two factors, it's not surprising the Wall Street analyst community believes Etsy's top line will grow more than 20% this year, driving a similar increase in earnings. What is surprising is the fact the stock's value has declined over 50% from November's peak.
Booking Holdings
Just when it looked like the pandemic was winding down, pow! The omicron variant of COVID-19 ripped across the planet, causing more infections than we saw in 2020 and into early 2021 when many assumed the pandemic was at its worst. New lockdowns and travel restrictions -- even self-imposed ones -- upended hopes that we'd start vacationing again, and subsequently rattled most of the budding rebounds from travel and tourism stocks. Online travel agent Booking Holdings (BKNG 1.14%) was no exception, losing over 20% of its value between November's high and low points.
There's a reason shares of Booking Holdings have reclaimed the majority of their recent sell-off, though. As it turns out, the world's mostly decided to move on with life despite the fact the coronavirus is still clearly with us.
Industry analytics outfit Destination Analysts reports that as of last week, 63.1% of people in the U.S. feel "life should go back to normal despite the pandemic." That's up from 60.3% just two weeks earlier. To this end, Destination Analysts says 92.1% of Americans will take at least one trip this year. Competing travel-booking website Expedia confirms the sentiment, adding that the average U.S. resident has budgeted $2,300 for their next trip. The UN's World Tourism Organization further believes the international travel business in on track to reach 2019's levels as early as 2024, with most of that recovery yet to come.
Booking Holdings' broad portfolio of online travel services is of course well-positioned to be the first stop as consumers start making those plans a reality.
Pool Corp.
Finally, add Pool Corp. (POOL -0.72%) to your list of growth stocks to buy sooner rather than later, since they're ripe for a rally. In this case, the rally will be augmented by the fact shares declined 17% year to date.
Yes, just as the name implies, Pool Corp. offers swimming pool supplies. It would be a stretch to say the business is in a recession-proof, non-cyclical industry. By and large, though, once someone owns a pool, they do whatever it takes to maintain it. At the very least, the pool supply market is a resilient one, and perhaps even more than it's ever been in the wake of the pandemic.
Yes, Booking Holdings may be a buy now that the world is inching its way back to normal, and people are traveling again. At the same time, however, COVID-19 has led consumers to appreciate making their homes ultra-comfortable "nests" worthy of investment. In this vein, Pool's revenue grew 23% in 2020 despite challenges other industries faced during that time, and the company will likely report a full-year top-line improvement of more than 32% once 2021's final results are posted. Growth is expected to decelerate to about 10% this year given the tough comparison.
However, there's no reason to think we won't see more of this momentum going forward as the industry's competitors consolidate, and market share is won by the biggest players. IMARC Group estimates the worldwide swimming pool construction market will grow at an average annual clip of 4% through 2026, with the U.S. (where Pool Corp. does the bulk of its business) set to lead that growth.
