This has been one of the most challenging years for Wall Street and investors in the past half-century. In terms of peak-to-trough decline, the benchmark S&P 500 and growth-oriented Nasdaq Composite have tumbled as much as 24% and 34%, respectively. This places both indexes in a bear market.
While bear markets can, undoubtedly, cause fear and test the resolve of investors, they're also a proven opportunity to buy game-changing businesses at a discount. As a reminder, every stock market correction and bear market throughout history has eventually been erased by a bull market rally.
The current bear market is an especially good time to scoop up supercharged growth stocks that've been beaten down by short-term fear. The following three monster growth stocks all have the potential to turn an initial investment of $200,000 into $1 million by 2030.
Over the next couple of quarters, there's no question that auto stocks are going to face a veritable mountain of headwinds. Automakers are contending with semiconductor chip shortages, provincial COVID-19 shutdowns in China that have led to parts shortages, and historically high inflation, which is eating into their operating margins. Yet, Nio has demonstrated that it has the ability and innovation to become a leading EV producer in China, the largest auto market in the world.
Once supply chain issues become a thing of the past, Nio shouldn't have any trouble ramping up production. In a two-year stretch, the company went from producing fewer than 4,000 EVs in a quarter to north of 25,000. In fact, production from November and December 2021 alluded to an annual run-rate near 130,000 EVs. Without supply constraints, I believe Nio can ramp to an annual run-rate of more than 500,000 EVs in 12 months or less.
What's even more critical to Nio's success is its ongoing innovation. For instance, it recently introduced two sedans, the ET7 and ET5, which'll compete directly against Tesla's flagship sedans, the Model S and Model 3. With the top-tier battery pack upgrade, Nio's sedans offer superior range, compared to Tesla's sedans.
Nio's battery-as-a-service (BaaS) subscription is another means to drive long-term growth. The BaaS program reduces the initial purchase price of a Nio EV and allows buyers to charge, swap, and upgrade their batteries. In return, Nio collects a high-margin monthly fee and, most importantly, keeps early buyers loyal to the brand.
The big knock against Trupanion is that it's chosen subscriber expansion over near-term profits. Reinvesting in its platform isn't cheap and has resulted in larger losses over the past couple of years. But patience can pay off handsomely when investing in the pet industry -- especially when you have as many competitive advantages as Trupanion.
Perhaps the most important thing to understand about pets is that owners will open up their wallets in any economic environment for their four-legged, feathered, and scaled family members. Data from the American Pet Products Association shows that it's been more than a quarter-century since U.S. year-over-year spending on pets declined.
On a more company-specific basis, Trupanion's opportunity lies with its enormous pool of potential "members." To date, the company has only penetrated about 2% of the U.S. and Canadian pet market. That compares to a 25% insured rate for pets in the United Kingdom. If Trupanion were able to grow enrollment to 25% of companion animals in the U.S., it would have an addressable market worth more than $38 billion. In other words, the pet insurance industry is still in its infancy.
Trupanion is also the only large pet insurance company that provides vet clinics with software to handle payment at the time of service. It's one of many reasons Trupanion's rapport with vet clinics is unmatched.
A third monster growth stock that can turn a $200,000 investment into $1 million by 2030 is cannabis multi-state operator (MSO) Cresco Labs (CRLBF). Cresco ended March with 50 operating dispensaries in 10 states.
Since February 2021, few industries have been more universally disliked by Wall Street than cannabis. The expectation had been that a Democrat-led Congress, along with the election of Democrat Joe Biden as President, would quickly lead to cannabis reforms passing at the U.S. federal level. But with no marijuana legalization or banking reforms becoming law, pot stocks have fallen into a 16-month downtrend.
While the weed industry has been a buzzkill for more than a year, it also offers an intriguing opportunity for patient investors to take advantage of rapid growth in legalized states. After all, three-quarters of all states have given the green light to marijuana in some capacity. That's music to the ears of the largest MSOs, such as Cresco.
Cresco's most front-and-center growth opportunity derives from its retail presence. Cresco has been targeting a number of limited-license states, such as Illinois, Ohio, and Massachusetts. Regulators purposely limiting the number of dispensary licenses issued gives Cresco's retail stores a fair chance to build up awareness of its brands and garner a loyal following.
Cresco Labs is also in the midst of a transformative deal that'll see it acquire MSO Columbia Care (CCHWF 0.79%) in an all-share deal. Assuming the deal closes, Cresco Labs would have over 130 retail locations in 18 markets. Columbia Care has regularly used acquisitions as a means to expand. In buying Columbia Care, Cresco would be turning the tables and gain immediate exposure in a number of high-dollar markets.
Lastly, Cresco Labs is the U.S.'s largest wholesale cannabis provider. Wall Street often dismisses wholesale marijuana due to its less favorable margins when compared to retail sales. However, Cresco holds a cannabis distribution license in California, the largest pot market in the country. This allows it to place its proprietary products into more than 575 dispensaries in the Golden State. This volume advantage more than outweighs the weaker margins associated with wholesale cannabis.