There's no sugarcoating that's it's been a topsy-turvy year for Wall Street professionals and the investing community. The first half of the year saw the broad-based S&P 500 deliver its worst return since 1970. Additionally, the U.S. economy delivered back-to-back quarters of gross domestic product (GDP) declines (although we're not officially in a recession).
It's been an even more challenging uphill slog for the growth stock-driven Nasdaq Composite (^IXIC 0.39%). Since hitting its all-time closing high in November, the Nasdaq has plunged as much as 34%, placing it squarely in a bear market.
Although the unpredictability and violent downside of bear markets can rattle investors and test their resolve, history has conclusively shown that patience pays off on Wall Street. Throughout history, every notable crash, correction, and bear market has eventually been put into the rearview mirror by a bull market rally. The dilemma facing investors shouldn't be if they should invest; it should be what to invest in.
The answer as to "what" to invest in couldn't be simpler: Growth stocks. Many fast-growing companies have been disproportionately beaten down during the Nasdaq bear market, which makes them potentially intriguing buys today. What follows are five exceptional growth stocks you'll regret not buying on the dip.
The first phenomenal growth stock you'll regret not scooping up during the Nasdaq bear market dip is none other than Warren Buffett-led Berkshire Hathaway (BRK.A 0.08%) (BRK.B -0.09%). Yes, value stocks can be growth stocks, too. Wall Street's forecast calling for double-digit earnings growth through 2024 for Buffett's company firmly qualifies it as a growth stock.
One of the primary reasons the Oracle of Omaha has overseen an average annual return of 20.1% over his 57 years as CEO is his love of cyclical stocks. Buffett isn't oblivious to the fact that recessions are an inevitable part of the economic cycle. But rather than trying to time when they'll occur, he's positioned Berkshire Hathaway to take advantage of disproportionately longer periods of economic expansion. For Buffett, this has meant taking a mammoth position in tech stock Apple and loading up Berkshire's investment portfolio with bank stocks that'll benefit immensely as interest rates rise.
Berkshire Hathaway's success is also a reflection of its investment portfolio being packed with dividend stocks. Although Buffett's company doesn't pay a dividend, it's on pace to collect in excess of $6 billion in passive income over the next 12 months. Publicly traded companies that pay a dividend are usually profitable and time-tested, and they have an excellent track record of sizably outperforming their non-paying peers over the long run.
To start with, healthcare stocks are defensive plays. No matter how poorly the U.S. economy or stock market perform, people will always need prescription drugs, medical devices, and healthcare services. This provides a safe demand floor for Exelixis year in and year out.
Second, lead drug Cabometyx has been a beast. It's already approved to treat first- and second-line renal cell carcinoma and previously treated advanced hepatocellular carcinoma. These indications have allowed Cabometyx to surpass $1 billion in annual sales. But with Exelixis's lead drug being examined in dozens of clinical trials, label expansion opportunities could eventually push Cabometyx beyond $2 billion in yearly sales.
The third catalyst is the company's balance sheet, which is swimming with cash. Having approximately $2 billion in cash, cash equivalents, and restricted cash equivalents and investments has allowed the company to reignite its internal growth engine, move novel products into early- and late-stage clinical trials, and forge multiple drug-development partnerships outside its walls.
Over the past year, Pinterest has been dragged through the mud over modest declines in its monthly active users (MAU). However, a wider-lens look at Pinterest's MAUs shows they've grown fairly steadily over the past five years.
What's far more important in the grand scheme of things is how well Pinterest has been able to monetize the users it has. Even though its MAUs declined by 21 million to 433 million from the prior-year period, the company generated global average revenue per user (ARPU) growth of 17% in the June-ended quarter, with even juicier ARPU growth in international markets. What this demonstrates is that businesses are willing to pay a premium to reach the company's 433 million potential shoppers.
Pinterest's platform is also relatively well-insulated from changes to operating system privacy and cookie-tracking software. The entire premise of Pinterest's platform is for users to freely and willingly share the things, places, and services that interest them. Providing this information makes it incredibly easy for merchants to target users with their ads. Pinterest is a potential e-commerce giant in the making.
Green Thumb Industries
A fourth remarkable growth stock that can be bought confidently with the Nasdaq plunging well off its all-time high is U.S. cannabis multi-state operator (MSO) Green Thumb Industries (GTBIF -1.59%).
Marijuana stocks lost their luster after February 2021, which is when Wall Street realized that the Democrat-led Congress and President Joe Biden wouldn't be prioritizing cannabis reform at the federal level. However, with roughly three-quarters of all states legalizing weed in some capacity, there have been more than enough organic opportunity for MSOs like Green Thumb to succeed.
Though Green Thumb has a presence in many of the higher-dollar cannabis markets, it's been prioritizing limited-license markets over the past year or two. Regulators in limited-license markets cap the number of dispensary licenses issued in total, and often to individual business. In other words, these are markets where Green Thumb has a good chance to build up its brand(s) and following.
Arguably the most exciting thing about Green Thumb is its revenue mix. Well over half of the company's sales come from derivatives, such as vapes, oils, edibles, and beverages. These higher-priced products produce substantially juicier margins than dried cannabis flower, and have played a big role in pushing Green Thumb to recurring profitability well ahead of other MSOs.
Like Pinterest, shares of Meta have been slammed by the prospect of weakening ad revenue following back-to-back quarters of gross domestic product declines. But this tells only a fraction of the story. Since economic expansions often last for years, ad-based businesses like Meta spend far more time in the sun than under the proverbial clouds.
What investors may not realize is just how dominant Meta is in the social media space. The company's top four assets -- Facebook, WhatsApp, Instagram, and Facebook Messenger -- are consistently among the most downloaded apps in the world and attracted a jaw-dropping 3.65 billion monthly active users in the second quarter. With over half the worldwide adult population visiting a Meta-owned asset monthly, it's no wonder the company possesses such excellent ad-pricing power.
But what could really be exciting are the company's metaverse ambitions -- the "metaverse" being the next iteration of the internet that'll allow connected users to interact with each other and their surroundings in a 3D virtual world. Although the metaverse is years away from being a moneymaker for Meta, it's a multi-trillion-dollar opportunity. Meta's investments could, ultimately, make it a gateway player to the next big thing in tech.