Bear markets aren't fun for investors to live through, but they do have their benefits. Lower stock prices set the stage for better long-term returns for those willing to buy during a period of elevated pessimism.
With that in mind, let's look at a few growth stocks that seem attractive at their discounted prices right now. Read on for good reasons to buy Lululemon (LULU -1.26%), Chewy (CHWY 1.92%), and Coca-Cola (KO 0.31%).
1. Lululemon
There are increasing risks in the athleisure industry today as inventories rise and demand growth slows. But Lululemon is succeeding through these challenges. Sales in the most recent quarter jumped 29%, far outpacing rivals like Nike. The apparel specialist also posted steady profit margins as it passed along higher costs through price increases.
Wall Street worries that the holiday season might bring slower growth and more price cuts, which would eat into Lululemon's market-leading operating profit margin. But savvy investors can look past that short-term turbulence toward an annual sales figure that will likely expand over the next few years as the company pushes into fresh markets like China and new demographics such as outerwear, menswear, and shoes.
2. Chewy has bite
Chewy isn't growing as quickly today as it was in earlier phases of the pandemic when pet adoption rates were soaring. But this e-commerce giant has a bright future ahead.
Consider that sales grew 13% in the most recent quarter, on top of 27% gains a year ago. Chewy also raised prices at a slightly faster rate than cost inflation, allowing it to increase margins through Q2. These wins make it a standout in the e-commerce space.
And its pet supply niche is recession-resistant, especially considering that over 80% of Chewy's sales are for essential products like pet food. Add in the fact that roughly three-quarters of its business is from auto-ship commitments, and Chewy will likely outperform most of its peers even if a recession develops into 2023.
3. Coca-Cola sells a lot of drinks
Looking at just Coca-Cola's latest earnings report would give you almost no indication that global economic growth is slowing. The beverage giant reported a blazing 16% sales spike in the period that ended in late September, marking accelerating growth compared to Q2. Coke's earnings are climbing just as quickly, with operating margins holding steady at 30% of sales. "Our business is resilient," CEO James Quincey told investors in late October.
That resilience is also generating impressive free cash flow, which is expected to approach $11 billion this year. Look for Coke to return much of that haul directly to shareholders through stock buybacks and a dividend. The dividend payouts have increased in each of the last 60 years.
It is rare that a Dividend King like Coke can be considered a growth stock, too. But that's the situation that investors are enjoying here in late 2022. While shares haven't declined this year, Coke is cheaper today on a price-to-earnings and price-to-sales basis, just like Lululemon and Chewy. These discounts make the growth stocks even more attractive right now.
