This has been a year to remember for investors in seemingly all the wrong ways. Since the major U.S. indexes hit their respective all-time closing highs between mid-November and the first week of January, the timeless Dow Jones Industrial Average, broad-based S&P 500, and growth-driven Nasdaq Composite (^IXIC 0.55%) have shed as much as 19%, 24%, and 34% of their value. You'll note by the drop in the S&P 500 and Nasdaq that both indexes have entered a bear market.
Although bear markets don't occur all that often, they can be scary -- especially for newer investors. The velocity and unpredictability of downward moves can cause investors to question their resolve. Yet history shows that buying during bear market declines is a genius move. Because every notable decline in the major U.S. indexes is eventually cleared away by a bull market, double-digit percentage declines are your green light to do some shopping.
It's a particularly smart time to go bargain-hunting for growth stocks, which have been disproportionately throttled by the Nasdaq bear market. What follows are five tremendous growth stocks ripe for the picking that you'll regret not buying on the Nasdaq bear market dip.
The first phenomenal growth stock you'll wish you bought during the Nasdaq bear market dip is fintech behemoth PayPal Holdings (PYPL 3.54%). Although Wall Street is worried about the near-term impact of historically high inflation on digital spending, they're ignoring the long-term potential for this industry leader.
One of the best aspects of digital peer-to-peer payment platforms is that they're still in the very early innings of their growth. Even with supply-chain and inflation-based challenges, PayPal's total payment volume still grew by 15%, on a constant-currency basis, during the first quarter, with 2.4 million net new active accounts. These are highly respectable figures given the 1.6% retracement for U.S. gross domestic product in the first quarter.
Even more important, we're seeing steadily increased engagement from the active users on PayPal's platforms. At the end of 2020, active accounts were completing 40.9 transactions over the trailing-12-month (ttm) period. But as of the end of the first quarter (March 2022), active accounts completed an average of 47 transactions over the ttm. Since PayPal is a fee-driven business, increased engagement among active users bodes well for sustained double-digit earnings growth.
PayPal is historically cheap and ripe for the picking by opportunistic investors.
Palo Alto Networks
The next tremendous growth stock that's begging to be bought on the Nasdaq bear market dip is cybersecurity company Palo Alto Networks (PANW 0.36%). Despite being pricier than many growth stocks, Palo Alto has a trio of catalysts in its sails.
First off, cybersecurity has evolved into a basic necessity service. No matter how well or poorly the U.S. economy and/or stock market are performing, hackers and robots don't take time off from trying to steal enterprise and customer data. This puts a predictable demand floor beneath most cybersecurity stocks, including Palo Alto.
Secondly, Palo Alto is in the midst of a multiyear transition that's de-emphasizing physical firewall products in favor of cloud-based subscriptions. Cloud-focused cybersecurity solutions are nimbler and more effective at responding to potential threats. Further, subscriptions can generate higher margins and steadier cash flow than physical firewall products.
Lastly, Palo Alto is differentiating its product offerings and expanding its ecosystem by making regular bolt-on acquisitions. These smaller buyouts allow the company to reach a broader audience, as well as cross-sell its security solutions.
Another genius growth stock to buy with the Nasdaq plunging into bear market territory is semiconductor chip solutions provider Broadcom (AVGO 0.46%). Putting aside the fact that semiconductor stocks are cyclical and the U.S. economy has shown numerous recession warning signs, Broadcom has a few tricks up its sleeve that makes it a no-brainer buy.
For instance, Broadcom should enjoy steady sales growth as a result of the 5G revolution. It's been about a decade since telecom providers meaningfully improved wireless download speeds. The ongoing upgrade of wireless infrastructure to support 5G speeds helps Broadcom, given that the company supplies 5G wireless chips and other accessories found in next-generation smartphones.
Additionally, this is a company that ended 2021 with a historically high backlog of $14.9 billion. Even if near-term demand were to abate a bit, the company's huge backlog would ensure steady operating cash flow. It's this cash flow that's helped Broadcom lift its quarterly dividend by more than 5,700% since 2010.
As one final note, cyclical stocks like Broadcom spend far more time in the sun than under the clouds. Even though recessions are inevitable, they usually only last a couple of quarters. By comparison, periods of expansion often last for years.
Green Thumb Industries
A fourth amazing growth stock you'll regret not buying on the dip is U.S. marijuana stock Green Thumb Industries (GTBIF 0.52%). Even though Congress has failed to pass any cannabis legalization or banking reform measures, there are more than enough catalysts for multi-state operators (MSOs) like Green Thumb to thrive.
As of the end of March, Green Thumb had more than six dozen operating dispensaries, many of which were in high-dollar markets. Interestingly, though, the company has been focusing its efforts on pushing into limited-license markets. A limited-license state is one that purposely caps retail license issuance in order to allow all license holders a fair chance to build up their brands and gain a following.
What makes Green Thumb Industries really special is its product mix. Well over half the company's sales come from selling derivative pot products, such as beverages, vapes, and oils. Derivative cannabis products offer significantly higher price points and margins than dried cannabis. It's this revenue mix that's helped Green Thumb deliver seven consecutive quarters of generally accepted accounting principle (GAAP) profits.
Since most marijuana stocks still haven't reached profitability, it demonstrates how far ahead of the competition Green Thumb is, relative to its peers.
The fifth and final tremendous growth stock you'll regret not buying on the dip is payment processor Mastercard (MA 0.13%). Short-term recession fears shouldn't scare patient investors away from a clear-cut leader like Mastercard.
The cyclical nature of payment processors is one reason to confidently buy Mastercard. As I described with Broadcom, economic expansions last substantially longer than contractions and recessions. Buying and holding Mastercard allows investors to take advantage of the natural expansion of the U.S. economy.
Mastercard also happens to be the No. 2 payment processor by credit card network purchase volume in the United States. Being the No. 2 is an envious position in the largest market for consumption in the world.
Investors should take note that Mastercard strictly sticks to the payment-processing side of the equation. While it wouldn't have any issue collecting interest income as a lender, doing so would expose the company to loan delinquencies and charge-offs during inevitable recessions. Avoiding lending means not having to set aside capital to cover loan losses, which is a big reason why Mastercard's profit margin has remained above 40%.