To proclaim 2022 as a challenging year for Wall Street might be an understatement. When the first-half of the year came to a close, the benchmark S&P 500 had delivered its worst return in over a half-century.
It's been an even bigger uphill battle for the growth-dependent Nasdaq Composite (^IXIC 0.67%). The index responsible for leading the broader market higher since the coronavirus crash of 2020 has shed as much as 34% of its value in eight months. This places the Nasdaq firmly in a bear market.
But amid this miserable performance is a silver lining. No matter how poorly the U.S. stock indexes have performed throughout history, every correction and bear market has eventually been erased by a bull market rally. This means bear markets are an excellent time for patient investors to put their money to work.
It's an especially smart time to consider buying growth stocks, which have a tendency to outperform during periods of weaker economic growth, relative to value stocks. What follows are three stellar growth stocks that have the innovative capacity to double your money by 2025.
The first phenomenal growth stock to buy to take advantage of this Nasdaq bear-market decline is cloud-based lending platform Upstart Holdings (UPST -3.43%).
It wouldn't be unfair to suggest that Upstart is one of Wall Street's most universally disliked stocks at the moment. It's an artificial intelligence (AI)-driven lending platform that, in the eyes of skeptics, is going to be pummeled by rapidly rising interest rates. Since Upstart is a relatively new business and has not been through a true economic downturn (not counting the extremely short COVID-19 recession), there's clear worry about how well it'll fare in the foreseeable future.
While I don't suggest dismissing these tangible concerns, it's important to recognize how effective Upstart's AI-lending platform was when the U.S. economy was chugging along. Instead of the multiple weeks that traditional loan applications can take, Upstart has been able to approve in the neighborhood of three-quarters of all loans on an automated basis. That's time saved for loan applicants, and it results in cost savings for financial institutions.
What's particularly interesting about Upstart's loan-vetting platform is that it's broadened the pool of approved applicants. Relying on AI has resulted in the approval of applicants with a lower average credit score than the traditional vetting process yields. But what's important is that the delinquency rate between Upstart's platform and the traditional process has been similar. This means Upstart can bring banks and credit unions more clients without adding to their credit risk.
Upstart also has history on its side. Although recessions are an inevitable part of the economic cycle, periods of expansion last substantially longer than recessions. All Upstart has to do is navigate its way through what'll likely be economic weakness lasting a couple of quarters. We've already seen that it can be extremely profitable during long-winded periods of expansion.
Investors with the patience to hold Upstart three years could be rewarded with a 100%, or greater, return.
Another incredible opportunity to double your money in three years is to buy U.S. cannabis multistate operator Jushi Holdings (JUSHF 7.80%).
Nearly 18 months ago, marijuana stocks couldn't be stopped. Joe Biden winning the presidency, coupled with Democrats taking control of the U.S. Senate, appeared to pave the way for cannabis banking reform and legalization initiatives. Unfortunately, COVID-19 and other pressing issues have, once again, stymied federal legalization efforts. Without progress on Capitol Hill, Wall Street hasn't wanted much of anything to do with U.S. pot stocks.
However, legalization isn't a requirement for cannabis companies to succeed. To date, around three-quarters of all states have legalized marijuana in some capacity, with 19 states also allowing adult-use consumption and/or retail sales. Even though interstate transport isn't possible, these organic legalizations at the state level are providing more than enough opportunity for companies like Jushi to shine.
For the moment, Jushi is a relatively small company. It's closing in on three dozen operating dispensaries, and it has enough retail licenses in its back pocket to ultimately open nearly 50 retail locations. What's notable about its expansion approach is that many of the states it's targeting are limited-license markets. States that purposely limit how many dispensary licenses are issued allow smaller players like Jushi a fair chance to build up their brand(s) and garner a loyal following. For Jushi, Virginia, Pennsylvania, Illinois, and Massachusetts are its key markets.
Something else to really appreciate about Jushi is the company's management team, which has a reasonable amount of "skin in the game." This is another way of saying that executives and insiders have aligned their success with that of their shareholders. For instance, CEO Jim Cacioppo, who holds 16.9% of his company's outstanding stock, purchased 100,000 shares of common stock about a month ago. To boot, $45 million of the first $250 million in capital raised by Jushi came from execs and insiders. When the interests of shareholders and executives align, good things happen more often than not.
Investors should expect annual sales growth of 30% to 50% through the midpoint of the decade, with Jushi pushing into recurring profitability by 2023 or 2024.
To keep with the theme of this list, there's a seemingly mountainous wall of headwinds currently set in front of Nio. It's contending with historically high inflation for the parts used in its EVs, semiconductor chip shortages, and product shortages tied to provincial COVID-19 lockdowns in China. Like many automakers, Nio has had to temporarily pare back production.
But what's important to note is that these supply chain headwinds are temporary. All signs continue to point to the world's largest economies pushing for a green-energy future that's backed by EVs and other clean-energy transportation. Nio just happens to be based in the largest auto market in the world.
We've already been given a glimpse of what Nio is capable of when the supply chain isn't a constraint. The company surpassed 10,000 EVs delivered in November and December, and had its best month yet when it delivered just shy of 13,000 EVs in June 2022. Prior to COVID-19 disrupting production in China, management appeared comfortable with the idea of reaching a 600,000 EV production annual run-rate (50,000 EVs/month) within 12 months.
Investors should also be impressed with Nio's multiple avenues of innovation. It's been introducing new vehicles on an annual basis, with the company recently unveiling its ET7 and ET5 sedans, as well as its more affordable, five-seater SUV, the ES7. The company's sedan lineup is noteworthy given that the top battery option provides superior range (621 miles), relative to most other EV sedans.
In addition, Nio introduced its battery-as-a-service (BaaS) subscription in August 2020. With BaaS, buyers receive a discount on the purchase price of their EV, and can charge, swap, and upgrade their batteries in the future. In exchange for giving up some lower-margin, near-term revenue, BaaS members provide Nio with a high-margin, recurring-subscription fee. BaaS is a smart tool to keep early buyers loyal, too.
With Nio capable of jaw-dropping sales growth and slated to push into recurring profitability by no later than 2024, it looks like the perfect candidate to double in value by mid-decade.