Regardless of whether you're a stock market "newbie" or you've been putting your money to work side-by-side with Wall Street professionals for decades, it's been a challenging year.
Since hitting their all-time closing highs in early January, the iconic Dow Jones Industrial Average and benchmark S&P 500 respectively lost as much as 15% and 20% of their value. Meanwhile, the growth stock-driven Nasdaq Composite (^IXIC +1.52%) has fared even worse. At its peak-to-trough decline since hitting a record intra-day high in November, the Nasdaq shed 31% of its value. This firmly places the tech-oriented index in a bear market.
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On one hand, bear markets can be scary due to the unpredictability and velocity of downside moves. Then again, history has shown time and again that all notable drops in the major indexes are eventually erased by a bull market rally. In other words, bear market declines are the ideal time for patient investors to put their money to work.
With the Nasdaq pushing into bear market territory, a number of growth stocks stand out as exceptional deals. What follows are five extraordinary growth stocks you'll regret not buying on the dip.
Amazon
The first extraordinary stock that's begging to be bought during the Nasdaq bear market is none other than e-commerce leader Amazon (AMZN +0.26%). Although inflation will almost certainly put pressure on the company's retail operations in the near term, Amazon has far too many competitive advantages for opportunistic investors to ignore.
NASDAQ: AMZN
Key Data Points
As most of you are probably aware, Amazon is the undisputed leader in U.S. online retail sales. Three months ago, eMarketer issued a report that estimated Amazon would bring in 39.5% of all e-commerce spending in the U.S. this year. For context, that's 8.5 percentage points higher than the next 14 competitors, combined. This overwhelming online retail share has fueled Amazon's higher-margin advertising and subscription (Prime) channels.
But what's most exciting about Amazon is its cloud infrastructure segment, Amazon Web Services (AWS). AWS accounts for roughly a third of all global cloud infrastructure spending. More importantly, the operating margins associated with cloud services are many multiples higher than the operating margins tied to online retail sales. With AWS growing by 30% or more on a yearly basis, Amazon can expect its operating cash flow to soar throughout this decade, if not well beyond.
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Etsy
A second phenomenal growth stock that's ripe for the picking after a huge pullback in the Nasdaq is Etsy (ETSY +3.84%). Yes, another e-commerce retailer. Though Etsy is facing the same inflationary pressures Amazon is contending with, it, too, has the competitive edge and differentiation to thrive over the long run.
Whereas most retail platforms, like Amazon, rely on volume, no e-commerce company has more intimate engagement with its users at scale than Etsy. The vast majority of Etsy's merchant network is comprised of small businesses and proprietors willing to cater to consumers' individual needs. Buyers simply aren't going to find this level of connection or customization with other large online retail platforms.
Additionally, Etsy has done an incredible job of maintaining and/or growing user engagement over time. By the end of 2021, the number of habitual buyers on Etsy's platform more than tripled in a two-year span. A "habitual buyer" spends an aggregate of $200 over a trailing-12-month time frame and makes at least six purchases. Turning casual shoppers into habitual buyers is what'll give Etsy the pricing power to charge merchants more for advertising and analytics.
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Redfin
For growth stock investors willing to take on more risk, technology-driven real estate company Redfin (RDFN +0.00%) has all the hallmarks of an extraordinary stock that can make patient investors a lot richer. Despite rapidly rising mortgage rates and the growing prospect of a near-term recession in the U.S., Redfin's unique approach should allow it to gobble up existing home-sale market share.
NASDAQ: RDFN
Key Data Points
One factor that sets Redfin apart from most real estate companies is the cost savings it can provide its customers. Whereas traditional real estate firms charge a 2.5% to 3% listing/commission fee, Redfin charges only 1% or 1.5%, depending upon on how much business was done with the company. In April, the median sales price of existing homes in the U.S. was $391,200. This means Redfin can save sellers more than $7,800.
The other defining factor is Redfin's personalization. This is a company that has an iBuying program designed to purchase homes from sellers with cash, thereby removing the hassle and haggling associated with putting a house on the market. Redfin also offers its Concierge service, which assists sellers with upgrades designed to maximize the value of their home. It's a true disruptor in the real estate space.
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Green Thumb Industries
Another fast-paced company you'll almost certainly regret not buying on the Nasdaq bear market dip is marijuana stock Green Thumb Industries (GTBIF 0.29%). Despite investors being disappointed with the lack of progress on Capitol Hill with regard to U.S. legalization, Green Thumb has managed to stand head and shoulders above virtually all other U.S. multi-state operators.
At the end of March, Green Thumb had 76 operating dispensaries and a presence in 15 states. While this presence does include high-dollar markets like California and Florida, the company has also strategically placed itself in a number of limited-license states, such as Illinois, Ohio, and Massachusetts. States that limit retail license distribution are encouraging competition, as well as allowing every retail operator an opportunity to build up a loyal following.
But what makes Green Thumb so special is its revenue mix. Approximately two-thirds of its sales come from derivatives, such as beverages, edibles, pre-rolled joints, and so on. Derivative pot products have higher price points and significantly juicier margins than dried cannabis flower. Relying on cannabis derivatives has helped Green Thumb report seven consecutive profitable quarters at a time when most pot stocks are still trying to turn the corner to profitability.
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Alphabet
A final extraordinary growth stock you'll regret not buying on the Nasdaq bear market dip is FAANG stock Alphabet (GOOGL +1.71%)(GOOG +2.00%), the parent company of internet search engine Google and streaming platform YouTube. Even with near-term concerns about tapering ad spending, Alphabet has all the tools necessary to make patient investors a lot richer.
NASDAQ: GOOGL
Key Data Points
To begin with, Alphabet has a veritable monopoly on global internet search. Based on data from GlobalStats, Google has controlled between 91% and 93% of worldwide internet search share over the past two years. With such dominance, it's no surprise that advertisers are willing to pay top dollar for prime placement on Google's search pages. Because economic expansions last substantially longer than recessions, this ad-driven segment is poised to grow substantially larger over time.
Similar to Amazon, Alphabet's shining star is its cloud infrastructure segment, Google Cloud. Google Cloud has continually grown by 40% or more annually, and is the global No. 3 in cloud infrastructure spending. The key here is that cloud margins are notably higher than advertising margins, and should therefore lead to rapid expansion of Alphabet's operating cash flow throughout the decade.
