This year has served as a kick-in-the-pants reminder that the stock market doesn't rise in a straight line -- even if 2021 gave the impression that it did. Since hitting their all-time highs between mid-November and the first week of January, the iconic Dow Jones Industrial Average, benchmark S&P 500, and growth-focused Nasdaq Composite (^IXIC +0.01%), have plunged by as much as 19%, 24%, and 34%, respectively. The greater-than-20% declines in the S&P 500 and Nasdaq firmly placed both indexes in a bear market.
Bear markets can be scary, with the speed and unpredictability of their downside moves truly testing the resolve of investors. But if history has a say, bear markets are also the perfect time to put your money to work. That's because every major stock market decline throughout history has eventually been erased by a bull market.
Image source: Getty Images.
With the Nasdaq Composite hit harder than the other indexes, it looks like the ideal time to invest in growth stocks with unmatched innovative capacity and sustainable competitive advantages. What follows are five unsurpassable growth stocks you'll regret not buying on the Nasdaq bear market dip.
Meta Platforms
The first phenomenal growth stock you'll be kicking yourself for skipping during the Nasdaq bear market is Meta Platforms (META +1.03%), formerly known as Facebook.
Advertising spending has been hit hard in 2022 as historically high inflation and back-to-back quarterly declines in U.S. gross domestic product suppress discretionary spending. But Meta remains well positioned to capitalize on disproportionately long periods of economic expansion.
Its Facebook, WhatsApp, Instagram, and Facebook Messenger are consistently among the most-downloaded apps worldwide. With 3.65 billion people visiting its sites on a monthly basis (that's over half the global adult population), Meta is in prime position to command strong ad-pricing power.
The other reason to like Meta is the company's aggressive investments in the metaverse, the next iteration of the internet that will allow users to interact with one another and their environments in a virtual 3D world. Though it'll take a few more years before the metaverse is ready to be meaningfully monetized, Meta fixes to be a key on-ramp to this multitrillion-dollar opportunity.
The company's shares are cheaper than they've ever been on a forward-earning basis. That makes this social-media maven a screaming buy at the moment.
NASDAQ: PUBM
Key Data Points
PubMatic
A second stellar growth stock begging to be bought as the Nasdaq Composite plunges is cloud-based programmatic adtech company PubMatic (PUBM 3.41%). Although it's contending with the same advertising spending weakness as Meta, it's on track to grow by a considerably faster rate.
PubMatic is what's known as a sell-side provider (SSP) in the adtech space. This is a fancy way of saying that it specializes in selling digital display space for publishers. Because there aren't many SSPs for publishers to choose from, and ad dollars have been steadily shifting to digital formats like video, mobile, and over-the-top streaming, the company has consistently delivered organic growth at twice the industry average or higher.
Perhaps the best aspect of the company is its internally designed cloud infrastructure platform. Rather than relying on a third party for its platform, PubMatic built its own infrastructure. While costly in the beginning, handling its own infrastructure should result in substantially higher operating margins than its peers as revenue scales up.
If you need one more solid reason to trust in PubMatic, consider this: The company ended June with $183 million in cash, cash equivalents, and marketable securities, and no debt!
Image source: Getty Images.
Palantir Technologies
The third unsurpassable growth stock worth buying on the Nasdaq bear market dip is Palantir Technologies (PLTR 3.41%), a data-mining company driven by artificial intelligence (AI). Palantir's valuation used to be its biggest obstacle. But following a greater than 80% retrenchment in its share price, it's now ripe for the picking.
What makes Palantir such an intriguing investment for long-term growth investors is that there's no other company offering what it does at scale. The company's AI-based Gotham platform helps government agencies with missions and data gathering. Meanwhile, its Foundry platform is focused on helping businesses streamline their operations by making sense of large amounts of data.
For the past couple of years, Gotham has been Palantir's primary growth driver. Being awarded large government contracts that can span four or more years has helped the company grow its sales by 30% or more on a consistent basis. But looking ahead, Foundry is the company's golden ticket. Whereas not all governments can use its proprietary software, Foundry's ceiling is much higher. As of June 30, the company had 119 commercial customers, which was up 250% from the prior-year period.
Though recurring profitability could be a few years away, Palantir's superb topline growth and niche industry positioning can send shares significantly higher.
NASDAQ: LOVE
Key Data Points
Lovesac
A fourth exceptional growth stock you'll be mad at yourself for not buying on the Nasdaq bear market decline is furniture company Lovesac (LOVE 1.51%). Yes, I really wrote "growth" and "furniture company" in the same sentence.
Whereas most brick-and-mortar furniture companies are slow-growing, stodgy businesses, Lovesac is turning the industry on its head in two key ways.
First off, its furniture is unique. The company's "sactionals" (modular couches that can be rearranged dozens of ways to fit most living spaces) account for nearly 88% of net sales. They incorporate function, choice, and eco-friendly materials. Sactionals can be upgraded to include surround-sound systems and wireless charging stations, and they have over 200 cover choices. The yarn used in these covers is made entirely from recycled plastic water bottles.
Second, Lovesac's omnichannel sales platform has led it to success. Although it has 162 retail locations in 40 states, the company's substantially higher margins are a reflection of its direct-to-consumer emphasis, as well as pop-up showrooms and brand-name partnerships. With less inventory needed in physical retail stores, Lovesac's overhead is considerably lower than its peers.
NASDAQ: GOOGL
Key Data Points
Alphabet
The fifth and final growth stock you'll regret not buying during the Nasdaq bear market dip is FAANG stock Alphabet (GOOGL +0.25%)(GOOG +0.31%), the parent of internet search engine Google, streaming platform YouTube, and autonomous-car company Waymo.
The no-brainer reason to pile into Alphabet is the company's absolutely dominant internet search engine. According to data from GlobalStats, Google has accounted for no less than 91% of worldwide internet searches for the trailing 24 months. So it's no surprise that its 88-percentage-point lead over its next-closest competitor lets Alphabet command exceptional ad-pricing power.
But what Wall Street and investors are most excited about is what Alphabet is doing with its available cash and operating cash flow. For instance, YouTube - which the company acquired in 2006 for $1.65 billion -- has paid off handsomely. Easily one of the best acquisitions in history, it has become the second-most-visited social site in the world, helping tremendously with ad and subscription revenue.
And Google Cloud, No. 3 in cloud-service market share, could become a key driver of operating cash flow for Alphabet by as soon as mid-decade (spending on cloud infrastructure is still in its early innings).
Like Meta Platforms, Alphabet has simply never been cheaper as a publicly traded company.
