Over the past three and a half months, Wall Street and investors have been given a not-so-subtle reminder that stocks can go down just as easily as they can rise. Since the year began, both the broad-based S&P 500 and 125-year-old Dow Jones Industrial Average entered official correction territory with declines of at least 10%. The tech-heavy Nasdaq Composite has fared even worse, with a peak decline between mid-November and mid-March of 22%.
Although big drops in the market can be scary at times due to the velocity of downside moves and the emotions that can accompany big swings in the indexes, they're historically the best time to put your money to work. Despite not knowing when corrections will occur ahead of time, how long they'll last, or how steep the decline will be, we do know that every notable correction throughout history has eventually been erased by a bull market rally. In other words, buying high-quality stocks and being patient is a proven moneymaking formula.
Image source: Getty Images.
Following sizable pullbacks in all of the major indexes, three unstoppable stocks stand out as serious wealth creators. If you were to invest $300,000 into these stocks right now and allow your investment thesis to play out over the next four-plus years, these companies have the potential to make you a millionaire by 2026.
Nio
The first unstoppable stock that has all the catalysts and intangibles needed to grow an initial investment of $300,000 into a cool $1 million by 2026 is electric vehicle (EV) manufacturer Nio (NIO 1.25%).
Like most auto stocks in recent months, Nio has hit the skids. Worries about auto loans in a rising-rate environment coupled with semiconductor chip supply shortages have weighed on the industry. But given Nio's innovation and the mammoth opportunity on its doorstep, this pullback is nothing more than a gift for patient investors.
Though estimates vary wildly, most industry executives believe roughly half the world's auto sales will be EVs by 2030, according to a survey conducted late last year by consultancy firm KPMG. This jibes with most large economies wanting to reduce their carbon footprints and halt/lessen the impact of climate change. This green-energy push is what should allow for a multidecade vehicle replacement cycle to take shape.
What's going to allow Nio to stand out among a growing sea of start-up EV manufacturers and legacy auto stocks is its innovation. A perfect example would be the debut of the ET7 and ET5 sedans this year. The full-size ET7 and mid-size ET5 both have battery upgrade options that can increase their range to about 621 miles. These two EVs are direct competitors to Tesla in China but can blow Tesla's flagship EVs out of the water on range (with a battery pack upgrade).
Beyond just introducing new vehicles, Nio rolled out its battery-as-a-service (BaaS) subscription in August 2020. With BaaS, buyers receive a discount on the initial purchase price of their vehicle and have the opportunity to charge, swap, and upgrade their batteries. For Nio, BaaS generates recurring long-term revenue and keeps early buyers loyal to the brand.
There's also plenty of reason to be encouraged by Nio's delivery growth. Even in the face of challenging supply chain issues, the company delivered nearly 25,800 EVs in the first quarter of 2022. Compare this to fewer than 4,000 EVs delivered in Q1 2020 to see how far the company has come in just 24 months.
With sales growing like wildfire and Wall Street anticipating a shift to recurring profitability in 2023, the recent pullback in Nio is the ideal time to stomp on the accelerator.
Image source: Getty Images.
Lovesac
Another unstoppable stock with all the tools necessary to increase in value by 233% over the next four years and change is furniture company Lovesac (LOVE 1.09%).
Normally, just saying the phrase "furniture company" would be all that's needed to put someone to sleep. Most furniture companies are slow-growing, brick-and-mortar-based businesses that rely on many of the same wholesale furniture manufacturers. But Lovesac has completely upended this industry with both its furniture and its omnichannel sales approach.
While Lovesac was initially known for its beanbag-styled chairs ("sacs"), nearly 88% of its net sales in fiscal 2022 came from sactionals. A "sactional" is a modular couch that can be rearranged dozens of ways to fit virtually any living space. These couches can come with a number of upgrade options, including wireless charging and high-end speakers built in.
Beyond just being functional, there are more than 200 different cover choices. This means it'll match any theme or color scheme of a home. And best of all, the yarn used in these covers is made entirely from recycled plastic water bottles. With older millennials as its core customer, Lovesac has promoted its eco-friendly furniture as a major selling point.
Aside from its functionality, choice, and ESG ties, Lovesac's innovation is on full display with its nimble omnichannel sales platform. Whereas most brick-and-mortar furniture retailers struggled during the pandemic, Lovesac thrived since it was able to shift nearly half its sales online. Though the company does have 146 retail locations in 39 states, it also leans on shop-in-shop partnerships and pop-up showrooms. Ultimately, we're talking about a company with substantially lower overhead expenses than a traditional furniture retailer.
Lovesac reached recurring profitability two years ahead of Wall Street's forecast and shouldn't have any trouble maintaining a growth rate of 20% (or higher) for the foreseeable future. That makes it a good bet to more than triple by 2026.
Image source: Getty Images.
Bark
A third and final unstoppable stock that can fetch massive gains for investors and turn a $300,000 investment into $1,000,000 by 2026 is dog-focused products and services company Bark (BARK -1.79%).
Bark is one of dozens of companies that debuted via special purpose acquisition company (SPAC). Most companies that have come to market via SPACs have been clobbered, with Wall Street and investors paying particularly close attention to stocks with premium valuations. However, in Bark's case, this beat down has provided the perfect entry point for patient investors.
First off, it's important to note just how much of a beast the pet industry has become. Last year, the American Pet Products Association estimated that U.S. owners spent nearly $110 billion on their furry, gilled, feathered, and scaled family members . It's been more than a quarter of a century since year-over-year spending on companion animals has declined in the U.S.
America's love for pets (specifically dogs) is readily apparent in Bark's operating results. The company's active subscribers jumped to 2.3 million by the end of 2021, with the average order value hitting an all-time high of $31.10.
These figures touch on Bark's core advantage: its subscription-based operating model. Even though Bark products can be found in tens of thousands of retail doors, including Walmart, 84% of the company's net sales in the fiscal third quarter were of the direct-to-consumer variety. The overhead costs of a subscription-based business are considerably lower than traditional brick-and-mortar pet stores. As a result, Bark's gross margin has consistently come in between 55% and 60%.
Additionally, Bark is counting on new products and services to drive subscription growth and add-on sales. For instance, it introduced Bark Eats during the pandemic. This service will work with owners to customize a dry-food diet for their pooch. For what it's worth, Bark notes that cross-sell and upsell revenue jumped 84% in the fiscal third quarter from the prior-year period.
Although Bark is losing money at the moment, its rapid growth in a virtually recession-resistant industry can't be ignored. Look for Bark to more than triple patient investors' money by 2026.
