It's been a truly challenging year for Wall Street professionals and everyday investors alike. The benchmark S&P 500, which is often viewed as a barometer of the stock market's health, produced its worst first-half return in 52 years and registered its biggest decline in September since 2002.
Things have been even worse for the growth-focused Nasdaq Composite (^IXIC -0.07%), which has lost as much as 34% of its value since its record closing high in November and is now firmly in the grips of a bear market. The companies that had been leading the broader market higher for years are now responsible for weighing it down.
Image source: Getty Images.
But there's good news. When there's fear on Wall Street, there's also, historically, opportunity. Over time, every double-digit percentage decline in the major U.S. indexes, including the Nasdaq, has been put into the rearview mirror by a bull market rally. The current bear market will eventually share this fate, which is why now is such a smart time to put your money to work.
What follows are five spectacular growth stocks you'll regret not buying on the Nasdaq bear market dip.
Walt Disney
The first extraordinary growth stock investors can confidently scoop up during the Nasdaq bear market decline is theme park operator and content behemoth Walt Disney (DIS -0.12%). If you're scratching your head and wondering why Disney qualifies for a growth stock list, look no further than Wall Street's 13% compound annual sales growth rate forecast for the company through the mid-decade.
What makes Walt Disney such a magical company for investors is its ability to engage and connect with people from all generations. Its theme parks bring families and friends together, while its movies and proprietary content can allow grandparents and grandchildren to be wrapped up in the same dream. Few companies on the planet have the ability to connect with people and traverse generational gaps quite like Disney -- and that's simply not replicable by other entertainment companies.
Another selling point is the incredible growth of streaming platform Disney+, which was launched in November 2019. In less than three years, Disney+ has ballooned to more than 152 million subscribers, which demonstrates the power of Disney's proprietary content. For context, it took Netflix well over a decade following the launch of its streaming platform to surpass 150 million subscribers.
Although the growing prospect of a U.S. or domestic recession is weighing on shares of Walt Disney, the long-term outlook for the company is as bright as ever.
PubMatic
If you want a growth stock you'll regret not buying on the Nasdaq bear market dip that's a bit more off-the-radar than Walt Disney, consider cloud-based digital adtech stock PubMatic (PUBM 5.24%). Even though ad spending is among the first things to be adversely impacted by a weakening U.S. economy, PubMatic looks well positioned to help long-term investors build wealth.
To start with the obvious, advertisers are steadily moving away from print and toward digital ad channels, such as video, mobile, and over-the-top programmatic ads (i.e., ads offered on internet-only media services). The digital ad industry is expected to grow by 14% annually through 2025. Comparatively, PubMatic has delivered an organic growth rate that has predominantly hovered between 20% and 50%.
One of the advantages for PubMatic is that it's a sell-side provider (SSP). This fancy term simply means it uses its programmatic ad platform to help publishers sell their digital display space. Because there's been a lot of consolidation among SSPs, there aren't many SSPs left for publishers to choose from. This has certainly helped the company's organic growth rate outpace the sales trajectory of the industry as a whole.
What's more, PubMatic built its programmatic cloud infrastructure rather than relying on third parties. As its revenue scales, PubMatic should recognize higher operating margins than its peers.
Image source: Getty Images.
JD.com
A third spectacular growth stock that's begging to be bought during the Nasdaq bear market dip is China-based e-commerce stock JD.com (JD 2.92%). Despite retail stocks being hammered by historically high inflation, JD is uniquely positioned to thrive within China's ascending economy.
When most people think of online retail sales in China, they probably think of Alibaba, the leading e-commerce provider. However, Alibaba's platform is almost entirely based on a third-party marketplace. Comparatively, JD's marketplace is mostly built as a direct-to-consumer model, just like Amazon. With JD handling both inventory and logistics, the company is able to exert more control over its operating margins, as well as avoid the ire of Chinese regulators, which have already cracked down on Alibaba.
But what's even more intriguing is JD's ancillary opportunities beyond e-commerce. This includes advertising, healthcare services, and cloud computing. Not only are these other sales channels growing at a faster pace than traditional online retail sales, but the margins associated with cloud services and even marketing are substantially higher.
With JD's stock more than halved over the past 20 months, now looks like the perfect time for patient investors to pile in.
Innovative Industrial Properties
Another fantastic growth stock you'll be kicking yourself for not buying on the Nasdaq bear market dip is cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (IIPR 0.20%). Although Congress has whiffed on its attempts to pass cannabis reform, IIP, as Innovative Industrial Properties is better known, is no worse for the wear.
Like most REITs, IIP aims to buy properties that it can lease out for extended periods. In its case, it's buying medical marijuana cultivation and processing facilities in legalized states. Through early September, it owned 111 properties spanning 8.7 million square feet of rentable space in 19 states. With IIP collecting 99% of its rents on time as of the end of June, the company's operating cash flow is highly predictable.
To add to the above, cannabis has acted like a discretionary good throughout the pandemic. No matter how high prices soar or how poorly the U.S. economy performs over the short term, consumers continue to buy pot products. This suggests demand for cultivation and processing facilities will remain strong, which would provide plenty of opportunity for IIP to grow its cannabis-focused real estate portfolio.
Innovative Industrial Properties' sale-leaseback agreements have been pivotal to its growth as well. As long as marijuana remains federally illegal, access to credit markets will be spotty for cannabis companies. IIP remedies this by purchasing properties for cash and then leasing acquired facilities back to the seller. It's a win-win scenario that puts cash into the pockets of cannabis companies and nets IIP long-term tenants.
Palantir Technologies
The fifth and final spectacular growth stock that you'll regret not buying on the Nasdaq bear market dip is data-mining company Palantir Technologies (PLTR 0.51%). While this bear market has been unkind to fast-paced stocks with premium valuations, Palantir has shown that it's deserving of a premium.
Perhaps the top reason to buy shares of Palantir is that, like Walt Disney, it's not a replicable business model. Palantir's artificial intelligence-driven Gotham platform helps governments with mission planning and data gathering. Meanwhile, the Foundry platform is responsible for helping businesses make sense of their data in order to streamline their operations. There simply isn't a company close to Palantir's scale that can offer what it does.
For the moment, Gotham is Palantir's shining star. Significant contract wins from the U.S. government, which often last four or five years, have helped propel Palantir to sales growth of 30% or higher. But looking ahead, it's Foundry that represents Palantir's golden ticket.
Though Gotham is still expected to grow at a healthy pace, its ceiling is ultimately capped by the fact that certain government agencies (e.g., China) would never be allowed to use its software. Meanwhile, the number of enterprise customers using Foundry more than tripled to 119 during the second quarter. Palantir is just scratching the surface with Foundry but should be able to sustain double-digit growth for a long time to come.
