This has not been the start to 2022 that most investors envisioned. The benchmark S&P 500 delivered its worst first-half to a new year since 1970, while the growth-dependent Nasdaq Composite tumbled, at one point, by more than 30%!
While there's no question that bear markets can be scary due to the unpredictability and velocity of their downside moves, they're also the ideal opportunity for patient investors to do some shopping. No matter how volatile things may appear in the short run, all notable declines in the broad-market indexes have eventually been cleared away by bull market rallies.
It's an especially good time to go bargain-hunting within the veritable sea of beaten-down, innovative growth stocks. The following three monster growth stocks all have the tools and intangibles necessary to turn a $350,000 initial investment into $1 million by 2028.
Novavax's claim to fame is the company's development of a COVID-19 vaccine, NVX-CoV2373. Last year, Novavax published the results of two large-scale studies involving its vaccine in the adult population. The U.K. trial produced an 89.7% vaccine efficacy (VE), while the U.S./Mexico trial yielded a 90.4% VE. Earlier this year, Novavax released the results from a third study involving adolescents that produced an 80% VE. The point being that NVX-CoV2373 is one of only a small handful of vaccines to have reached the elusive 90% VE mark in clinical trials.
What makes Novavax's COVID vaccine so intriguing is that it's protein-based, rather than focused on messenger RNA. There's a real possibility that vaccine holdouts who were concerned about mRNA vaccine technology might be more willing to receive the Novavax jab, assuming it's given the green light by the U.S. Food and Drug Administration (FDA) for emergency-use authorization (EUA).
To build on this point, the FDA's advisory panel seemingly gave Novavax's vaccine a resounding endorsement in June. The panel, with one abstention, voted 21-0 in favor of approving the company's vaccine for EUA. Ultimately, the FDA granted EUA to Novavax's COVID vaccine this past week.
Aside from its success in fighting COVID-19 infection, the development of NVX-CoV2373 demonstrates the value of Novavax's drug platform. In particular, it suggests the company could quickly become a leader in developing combination vaccines, such as influenza and COVID-19, or variant-specific COVID-19 vaccines.
What's more, Novavax is sitting on a veritable mountain of cash. The company ended March with $1.57 billion in cash and cash equivalents, and is likely to add to these totals as it rakes in between $4 billion and $5 billion in COVID-19 vaccine sales orders in 2022. With a significant portion of the company's market cap supported by its cash, Novavax is highly de-risked as an investment.
Valued at less than 3 times Wall Street's forecast earnings for this year, Novavax looks to be an absolute steal among growth stocks.
Green Thumb Industries
As of February 2021, there wasn't a buzzier industry than cannabis. The expectation had been that Democrats gaining control of Congress, and Joe Biden taking the Oval Office, would roll out the proverbial green carpet for federal cannabis reforms. Unfortunately, the ongoing pandemic and a slew of other issues have derailed lawmakers' attempts to legalize weed in the United States. As a result, multi-state operators (MSOs) like Green Thumb have taken it on the chin. Thankfully, this shortsightedness can be your opportunity to pounce.
The first thing to understand about the U.S. pot industry is that federal legalization isn't necessary for its success. Approximately three-quarters of all states have given the green light to cannabis in some capacity, which is providing more than enough organic opportunity for MSOs like Green Thumb.
It's also worth noting that cannabis is treated as a nondiscretionary good. This is a fancy way of saying that consumers continue to buy pot products even if economic activity weakens or inflation soars. In a way, this makes marijuana products a basic necessity item for consumers in legalized states.
What makes Green Thumb such an intriguing MSO is its revenue mix. According to a May presentation from the company, well over half of the company's sales come from derivatives, such as beverages, vapes, oils, and pre-rolls. Aside from their higher price point, derivatives boast juicier margins than dried cannabis flower. Green Thumb's product mix has played a key role in the company generating a generally accepting accounting principles (GAAP) profit in each of the past seven quarters. For context, most U.S. MSOs still aren't profitable on a recurring basis.
Green Thumb has also placed a lot of emphasis on expanding into limited-license markets. States where dispensary licensing is purposefully limited allows a company like Green Thumb the time to build up its brands and a loyal following.
With a rapidly growing operating model that's clearly working, Green Thumb Industries should soon have its patient shareholders seeing green.
The third and final monster growth stock that can turn $350,000 into $1 million by 2028 is cloud-based lending platform Upstart Holdings (UPST -1.99%).
Without a doubt, there'll be no shortage of skeptics ready to bet against Upstart. Last week, the company preannounced its second-quarter operating results, which fell well short of its previous guidance. According to the company, revenue is expected to be about $228 million, with a net loss ranging from $31 million to $27 million. This compares to its own prior forecast of $295 million to $305 million in sales and a quarterly loss ranging from $4 million to $0 (breakeven).
The company cited inflation and recession fears as driving up interest rates and making lenders far more cautious. As a reminder, Upstart's platform is new and has yet to be battle-tested during an economic downturn.
But in spite of this negative news, my opinion of Upstart's artificial intelligence (AI)-based lending model remains unchanged. Rather than relying on a decade's-old loan-vetting model, Upstart's platform is able to use AI to completely automate and instantly approve about three-quarters of all applications. This means more loans can be processed at a cheaper cost to financial institutions.
Furthermore, Upstart's AI-lending platform has produced approvals at a lower average credit score than the traditional loan-vetting process; yet there hasn't been a deterioration in loan delinquencies despite this drop-off. This suggests Upstart's lending platform can open doors for a broader swath of society. Even as loan applications decline, Upstart's recent success makes it more likely that financial institutions turn to its AI solutions as a vetting tool.
But perhaps the most-exciting aspect of Upstart's lending platform is its expansion potential. Throughout the company's young history, it's predominantly focused on personal loans. Following the acquisition of Prodigy Software in 2021, Upstart now has access to AI-based auto loans. The addressable market for auto loans ($751 billion) is nearly seven times larger than that of personal loans ($112 billion). Over many years, I'd be surprised if Upstart's AI lending platform wasn't also used for mortgage loan originations -- a $4.5 trillion market.
Although Upstart is rough around the edges at the moment, it has the innovative capacity and AI-powered platform to make financial institutions and its patient investors a whole lot richer.