Down more than 26% so far this year, the Nasdaq Composite has been in a bear market for some time, while the S&P 500 briefly entered into bear market territory last week. While it has undoubtedly been a difficult year for many investors, bear markets inevitably return to bull markets.
With that in mind, investors should prepare now and look for bargains while a bear market is in full swing because investors with a long-term outlook are often rewarded. Here are three monster growth stocks trading near 52-week lows that you should consider buying right now with the market trading in or near bear territory.
Image source: Getty Images.
1. Paypal Holdings
The online payments and e-commerce platform Paypal Holdings (PYPL -1.83%) has seen its stock hammered close to 57% this year, as the world normalizes and more in-person shopping returns. Investors are also worried about a potential recession, which could slow discretionary spending and therefore projected payment volume on Paypal.
But at this point, Paypal has built a very strong moat, which includes 429 million consumer accounts and roughly 30 million merchant accounts, which creates quite the ecosystem. In 2021, Paypal saw a jaw-dropping $1.25 trillion of payment volume flow through its platform. Additionally, Paypal owns the massive peer-to-peer money transfer app Venmo which continues to expand its services and users.
The stock now trades lower than it did before the pandemic. With the stock now valued at 27 times earnings, Paypal trades at its lowest earnings multiple since it went public. Yet between 2015 and 2021, the company grew total payments volume by 334%, active accounts by 135%, and revenue by 176%. Sure there are near-term headwinds, but at the end of the day, digital payments and e-commerce are only going to become more ubiquitous.
2. LendingClub
The digital marketplace bank LendingClub (LC) has been on quite the journey since it was founded in 2006 as one of the early disruptors in the online personal loan space. It went public in 2014, saw its stock soar, got hit with a big scandal, saw its stock crater, struggled, and then completely shifted its business model.
In 2021, it completed its purchase of Radius Bank, making it one of the first fintech companies to successfully obtain a bank charter. And this time, I think it has found the right equation for success. The bank charter saves LendingClub from having to pay other banks to originate loans and gives it a solid stream of deposits to fund a large chunk of originations, making it less reliant on the capital markets. LendingClub also now holds 20% to 25% of its loan originations on its balance sheet and collects monthly recurring interest income, which is way more profitable over the life of a loan than just selling it to investors.
In the first quarter of the year, Lendingclub generated record net income of close to $41 million on revenue of roughly $290 million and raised full-year guidance. As it continues to grow personal loans on its balance sheet, profits should continue to grow. With the chance of a recession looming, investors are concerned over its exposure to the consumer, but LendingClub serves a strong borrower with an average FICO score of 727. It also prudently reserves for loan losses. Trading at just 8.5 times projected earnings in 2022, this is a great time to get in.
3. Silvergate Capital
Known as the crypto bank, Silvergate Capital (SI -2.44%) has built a real-time payments platform called the Silvergate Exchange Network (SEN) that can clear and settle transactions instantly. Because the U.S. doesn't operate on a real-time payments system and cryptocurrencies trade around the clock, SEN has been a huge draw for crypto exchanges and institutional crypto traders. SEN now has more than 1,500 clients on it, and these clients bring Silvergate lots of non-interest-bearing deposits the bank doesn't have to pay any interest on. This makes Silvergate a huge beneficiary of rising interest rates because when rates rise, Silvergate's excess cash can be deployed into higher interest-earning assets. Now, there is a concern that if crypto prices keep falling, perhaps clients will pull their deposits or deposit growth would slow, but if you believe in long-term crypto adoption like I do, then Silvergate has tremendous appeal.
In addition, Silvergate bought the Diem technology from Meta Platforms and is working to launch a U.S. dollar-backed stablecoin, which is a digital asset pegged to a fiat currency or commodity. Stablecoins have an interesting track record, but I think Silvergate's could be the most legitimate one yet given it is coming from a highly regulated bank. I don't believe any potential earnings from the stablecoin initiative are priced into the stock yet.
