When President Joe Biden took office a little over a year ago, the stars were aligned perfectly for what looked like an extended rally. Federal Reserve Chairman Jerome Powell had every intention of keeping lending rates at historic lows through 2023, and there was optimism that Biden's multi-trillion dollar infrastructure spending package, known as Build Back Better, would provide a boost to a variety of sectors and industries.
But less than 14 months later, Powell is now set to begin raising interest rates to combat the highest rate of inflation in four decades. Meanwhile, Biden's infrastructure spending bill failed to advance in Congress. When these factors are coupled with the uncertainties surrounding COVID-19 and the ongoing Russia-Ukraine conflict, it's perhaps not surprising that the growth stock-heavy Nasdaq Composite hit bear market territory last week (i.e., a decline of at least 20% from its closing high).
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Although bear markets can be unnerving, they're historically a great time to put your money to work in fast-growing, innovative companies. After all, every bear market has eventually been erased by a bull market rally.
With that being said, the following three sizzling growth stocks would be perfect additions to patient investors' portfolios during a Biden bear market.
Nio
Though supply chain concerns have made things scary in the short run for auto stock investors, the long-term future for electric vehicle (EV) manufacturers is incredibly bright. That's why any significant pullback is your opportunity to stomp the accelerator on shares of fast-growing EV stock Nio (NIO 3.49%).
With semiconductor chip shortages expected to persist in the near-term, Nio's expansion, and that of its EV peers, has been temporarily slowed. But that didn't stop the company from showcasing its potential late in the fourth quarter. Even with supply chain challenges, Nio surpassed 10,000 deliveries in November and December and neared a 130,000 annual EV delivery run rate. Management continues to believe a 600,000 EV delivery run-rate is possible by the end of 2022.
Nio is really turning heads when it comes to innovation. Keep in mind this innovation comes in multiple forms. For instance, the company's recently unveiled ET7 and ET5 sedans offer premium battery package options that increase range to about 620 miles. That makes the ET7 and ET5 direct competitors to Tesla Motors' premium Model S and more affordable Model 3.
What's more, the company's battery-as-a-service (BaaS) program is pure genius. With BaaS, buyers receive a discount off the initial purchase price of their vehicle, as well as the option to charge, swap, or upgrade their batteries. In exchange, they pay a monthly fee to Nio. Though Nio is giving up some short-term revenue, it's generating more consistent long-term revenue and securing the brand loyalty of its early buyers.
The expectation is that Nio will become profitable on a recurring basis by no later than 2023. That makes it a screaming buy at its current price.
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Novavax
One of the best aspects of healthcare stocks is that they don't need the stock market to climb in order to thrive. Since people can't choose when they get sick or what ailment(s) they develop, there's always demand for prescription drugs, medical devices, and healthcare services. This is why rapidly growing biotech stock Novavax (NVAX -0.95%) is such a smart Biden bear market buy.
Novavax is best known for its COVID-19 vaccine, NVX-CoV2373. The company has run three large-scale studies of its lead vaccine, with two adult studies (the U.K. and U.S./Mexico) producing vaccine efficacy (VE) of 89.7% and 90.4%. The more recent third trial involved teens aged 12 to 17 and produced a VE of 82% when the delta variant was most common. Only a small number of COVID-19 vaccines have achieved the 90% VE threshold during any studies. This should allow Novavax to become one of the key players in initial inoculations and booster shots.
Investors are also getting quite the bargain on Novavax due to short-term filing delays and manufacturing ramp-up issues. The filing delays are now effectively in the rearview mirror, with the company laser-focused on increasing its production capacity.
Furthermore, Novavax has an opportunity to develop combination vaccines that beat its competition to market. Imagine being able to receive an annual booster shot for influenza and COVID-19 at the same time.
Novavax is on pace to nearly quadruple its sales in 2022, all while being valued at less than four times Wall Street's forecast earnings for the year. That's what I'd call a solid Biden bear market buy.
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CrowdStrike Holdings
The third sizzling growth stock to scoop up during a Biden bear market is cybersecurity company CrowdStrike Holdings (CRWD -0.68%).
If you're noticing a trend here, it's that certain fast-growing industries are mostly or completely impervious to wild swings in the stock market. Cybersecurity happens to be another one of those industries. Hackers and robots don't take time off from trying to steal enterprise and consumer data just because Wall Street had a bad day. That means cybersecurity has evolved into a basic necessity solution for businesses of all sizes.
The cloud-native Falcon security platform is what makes CrowdStrike tick. Falcon relies on artificial intelligence (AI) and oversees over 1 trillion events on a daily basis. Since it's built in the cloud and leans on AI, Falcon can more effectively identify and respond to threats than traditional on-premises solutions. This high-quality endpoint protection is probably why the company's gross retention rate has hovered around 98% for more than years.
As I've previously pointed out, CrowdStrike is impressing with both its new user growth and the company's ability to encourage existing clients to spend more. In a five-year stretch, the company's subscriber count has ballooned from 450 to 16,325. Meanwhile, the percentage of existing clients that purchased four or more cloud-module subscriptions rocketed from 9% to 69%. Not surprisingly, year-over-year organic sales growth from existing clients has hit at least 20% for 16 consecutive quarters.
As the icing on the cake, CrowdStrike's adjusted subscription gross margin is already 79% despite the company still being in its early stages of its growth. It's a no-brainer buy even with the Nasdaq pushing into bear market territory.
