This year has served as a good reminder that stocks don't move up in a straight line -- even if 2021 made you believe they did. For instance, the benchmark S&P 500, which is viewed as an encompassing measure of broad-market health, turned in its worst first-half performance in 52 years.
It's been an even tougher slog for the growth-dependent Nasdaq Composite (^IXIC 1.37%). The index largely credited with pulling the stock market out of the COVID-19 pandemic doldrums has shed as much as 34% of its value following its November closing high. This put the Nasdaq squarely in the grips of a bear market.
Although bear markets can be scary, history has shown time and again that they're the perfect time to put your money to work. That's because every notable decline for the major indexes, including the Nasdaq Composite, has eventually been cleared away by a bull market.
It's an especially smart time to go bargain-hunting in the growth stock arena. What follows are five incomparable growth stocks you're going to regret not buying on the Nasdaq bear market dip.
The first phenomenal growth stock you'll be kicking yourself for not buying during the Nasdaq bear market decline is fintech behemoth PayPal Holdings (PYPL -1.76%). Although PayPal's lower-earning decile of customers has been hurt by historically high inflation, digital payments offer a sustainable growth runway.
One of the most impressive things about PayPal has been the persistent double-digit percentage growth, on a constant-currency basis, of total payment volume (TPV) on its digital platforms. Even with U.S. gross domestic product retracing in back-to-back quarters, PayPal has sustained double-digit TPV. Because periods of expansion last substantially longer than contractions and recessions, PayPal is perfectly positioned to thrive from growing digital payment uptake.
Speaking of engagement, PayPal's active accounts tell a very encouraging story. When 2020 came to a close, the company's average active account was completing almost 41 payments per year. Just 18 months later, the average active account completed nearly 49 transactions over the trailing-12-month period. Because PayPal is predominantly a fee-driven platform, this steady growth in engagement signals higher gross profits on the horizon.
PayPal is about as cheap as it's ever been as a publicly traded company, which makes it a screaming buy for patient investors.
A second exceptional growth stock that long-term investors will regret not scooping up during the Nasdaq bear market is online services marketplace Fiverr International (FVRR -0.56%). Despite near-term concerns about the slowing U.S. economy adversely affecting demand for freelance work, Fiverr is uniquely positioned to take advantage of a structural shift in the domestic work environment following the COVID-19 pandemic.
Differentiation is the big key to Fiverr's success. While most online service marketplaces present services on an hourly basis, Fiverr's freelancers offer their services as a package. This provides considerably more price transparency for the proprietors and businesses looking to employ a freelancer. Perhaps most importantly, this transparency has helped grow the average spend per buyer sustainably.
The other way Fiverr stands out is with its take-rate -- the percentage of the deals negotiated on its online services marketplace that it gets to keep. Whereas most of its competitors have take-rates in the mid-teens, Fiverr's take-rate was a jaw-dropping 29.8% in the June-ended quarter. Having a take-rate that's double what its competitors generate, and seeing average spend per buyer continue to climb, is a one-two punch that should prove quite profitable for Fiverr and its investors.
The third incomparable growth stock begging to be bought as the Nasdaq dips into a bear market is semiconductor solutions provider Broadcom (AVGO 2.06%). Even though supply chain constraints and near-term order weakness are wreaking havoc up and down the chip industry, Broadcom has clear-cut advantages to help it weather the storm.
To begin with, Broadcom generates the bulk of its revenue from developing and selling wireless chips and accessories found in next-generation smartphones. It's been roughly a decade since telecom providers made sweeping upgrades to their wireless infrastructure. The 5G revolution, which brings faster download speeds to businesses and consumers, should lead to a steady smartphone replacement cycle through at least the midpoint of the decade.
Broadcom's ancillary operating segments offer intrigue as well. The company's solutions are increasingly found in next-generation vehicles, which have grown more reliant on technology. But the most exciting growth opportunity might come from data centers, where Broadcom supplies connectivity and access chips. With businesses accelerating the pace they're moving data into the cloud following the pandemic, data center demand should continue to climb.
The cherry on top for Broadcom is that it ended last year with a record backlog of $14.9 billion. This backlog provides transparency to the company's cash flow in an uncertain economic environment.
A fourth spectacular growth stock you'll wish you'd bought on the Nasdaq's bear market dip is cannabis company Cresco Labs (CRLBF -1.08%). Though there's been clear hesitation on Wall Street's part with the U.S. federal government kicking the can on marijuana reforms, multi-state operators (MSOs) like Cresco can still thrive thanks to abundant state-level legalizations.
There are two aspects to Cresco Labs' growth strategy that make it such an intriguing buy. First, the company has really focused its retail expansion on limited-license markets. While it does have a presence in a number of high-dollar cannabis markets, its entrance into limited-license markets -- markets where dispensary license issuance is capped -- should ensure a fair chance to build up its brands and garner a loyal clientele.
Cresco is also in the midst of acquiring MSO Columbia Care, which'll make the combined company one of the largest MSOs in the U.S. When the deal closes, Cresco will have more than 130 operating dispensaries in 18 states.
The second unique factor about Cresco is its industry-leading wholesale operations. Though Wall Street tends to frown on the lower margins associated with wholesale cannabis, Cresco benefits big-time from volume. That's because it holds a marijuana distribution license in California, the biggest pot market by annual sales.
The fifth incomparable growth stock you'll regret not buying on the Nasdaq bear market dip is tech giant Microsoft (MSFT 0.58%). Not even the growing likelihood of a U.S. and/or global recession should make long-term investors think twice about putting their money to work in "Ole Softy."
One of the reasons Microsoft makes for such a fantastic investment is that its legacy and innovation segments work hand-in-hand. For example, the company's Windows operating system isn't the growth story it was 20 years ago. But given that Windows still accounts for roughly three-quarters of global desktop OS market share, it's an absolute cash cow for the company. The cash generated from Windows allows Microsoft to make earnings-accretive acquisitions and reinvest in fast-growing initiatives.
Without question, Microsoft's top growth initiative is anything having to do with cloud computing. Microsoft Azure is the global No. 2 in cloud-service spending, as of the June-ended quarter, with sustained constant-currency sales growth of almost 50%. With cloud spending still in its early stages, Microsoft's annual operating cash flow should surpass $100 billion sooner than later.
As a final note, Microsoft is one of only two publicly traded companies that sports the coveted AAA credit rating from Standard & Poor's (S&P), a division of S&P Global. In simple terms, S&P has the utmost faith that Microsoft can service and repay its debts.
This is a well-known stock with an incredibly high floor and a continually rising ceiling.