There's little question that this has been one of the most-challenging years on record for Wall Street and investors. Since hitting their all-time closing highs within the past eight months, the timeless Dow Jones Industrial Average, the benchmark S&P 500, and technology-dependent Nasdaq Composite (^IXIC -0.04%) have shed as much as 19%, 24%, and 34% of their value, respectively. In fact, this was the worst first half to a new year for the S&P 500 since 1970.
In one respect, bear market declines like we're witnessing in the S&P 500 and Nasdaq can be scary. The velocity of downside moves can be unpredictable and weigh on an investor's resolve. But history also shows that bear market declines are the ideal opportunity for patient investors to pounce. That's because every double-digit percentage decline throughout history (including in the Nasdaq Composite) has eventually been cleared away by a bull market rally.
It's an especially intriguing time to go bargain hunting among innovative growth stocks. While it can be hard to look past the near-term weakness and/or struggles of fast-paced companies during a bear market, there are some true game changers that have the potential to make long-term investors a whole lot richer.
What follows are three game-changing stocks you can confidently buy during the Nasdaq bear market that can triple your money by 2027.
The first groundbreaking stock that has all the tools and intangibles necessary to triple your money over the next five years is cloud-based lending platform Upstart Holdings (UPST 4.79%).
To some investors, Upstart might look like a stock to avoid at the moment. Just two weeks ago, the company announced preliminary second-quarter operating results, noting that it would widely miss its prior revenue and net-loss forecasts. According to the company, inflation and recession fears are driving up interest rates and causing lending institutions to be more cautious. That's obviously not great news, at least in the short term, for a company whose purpose is to vet loans.
However, Upstart's operating model brings a slew of competitive advantages and intriguing growth opportunities to the table that should allow it to maintain a superior growth rate over the next five years, if not well beyond.
For example, Upstart relies on artificial intelligence (AI) to vet loans. Whereas the traditional vetting process can take weeks and be quite costly, approximately three-quarters of all Upstart loans are being fully automated and approved. This saves applicants time, and more importantly saves financial institutions money.
To build on this point, Upstart's AI-driven lending platform has opened the door to a broader swath of the population. Relying on AI instead of traditional vetting metrics has allowed persons with lower credit scores to be approved for loans. But even though Upstart's approvals have lower average credit scores than with the traditional vetting process, delinquency rates have been similar. In other words, Upstart's loan pool is giving financial institutions a larger addressable market without increasing their risk.
What's more, Upstart is pushing into new loan channels that offer more opportunity. Following the company's acquisition of Prodigy Software in 2021, Upstart can now offer AI-based auto loans. The auto-loan origination market is nearly seven times the size of personal loans, which is where it has focused most of its attention until now. With an addressable loan-origination market of $6 trillion, which includes mortgages and small-business lending, Upstart's ceiling appears sky-high.
A second game-changing stock that can confidently be bought during the Nasdaq bear market and can triple your money over the next five years is furniture maker The Lovesac Company (LOVE -0.09%).
Normally, the phrase "furniture stock" is used to put someone to sleep. Furniture companies are typically stodgy brick-and-mortar operators that rely on the same small group of wholesalers for their products. What makes Lovesac so interesting is that it's looking to disrupt this stodgy industry in a variety of ways.
It all begins with Lovesac's products. While the company was originally known for selling beanbag-styled chairs known as sacs, nearly 88% of its revenue these days comes from selling its "sactionals." These are modular sectional couches that can be rearranged dozens of ways to fit most living spaces.
Aside from offering functionality, sactionals differentiate themselves based on their available options. Buyers have more than 200 different covers to choose from, which ensures that sactionals can match the color or theme of any living space. And they can be upgraded with wireless charging and/or surround-sound systems.
As one final note, the yarn used in sactional covers is made entirely from recycled plastic water bottles. This makes Lovesac's products incredibly eco-friendly, which is probably why early-born millennials are the company's core customers.
Beyond its products, Lovesac uses its omnichannel sales platform to stand out. For instance, the company was able to shift around half of its sales online during the pandemic. Having a sizable direct-to-consumer presence, as well as leaning on pop-up showrooms and online partnerships, helps lower the company's overhead and boosts its operating margins.
Long story short, this furniture stock offers sustainable revenue and profit growth of 15% to 20% annually.
Like virtually all auto stocks, Nio has faced a hurricane of headwinds over the past couple of quarters. The pandemic and Russia's invasion of Ukraine have led to shortages of semiconductors and auto parts in general. To boot, historically high inflation has crimped automakers' margins.
The good news is that Nio looks to be turning the corner despite these headwinds. In June, the company delivered an all-time high 12,961 EVs. Even with reduced output during April and May, the automaker still achieved more than 25,000 deliveries during the second quarter. If supply chain challenges can be resolved relatively quickly, the company shouldn't have any trouble ramping up to 50,000 EV deliveries on a monthly basis within 12 months.
Aside from strong EV demand, Nio's innovation is what's truly impressive. In June, the company unveiled the ES7, a midsize five-seater SUV that'll slide in at a more-affordable price point versus its ES8. It also began deliveries of the ET7 sedan in March, and will begin deliveries of the ET5 sedan in September. With the top battery pack upgrade, both the ET7 and ET5 offer superior range relative to Tesla's flagship sedans.
Another innovation worth noting is Nio's battery-as-a-service (BaaS) subscription model, which was introduced in August 2020. With BaaS, EV buyers receive a discount on the initial purchase price of their vehicle, and can charge, swap, or upgrade their batteries in the future. In return, Nio receives a high-margin monthly subscription fee and keeps early buyers loyal to the brand.
Because China is the largest auto market in the world and its EV industry is still nascent, Nio has an incredible opportunity to gobble up market share and become an industry leader. By 2027, it should be swimming in annual profits.