2 Unstoppable Growth Stocks That Billionaires Are Buying in a Bear Market

2022 is shaping up to be a rough year for many investors. The broad-based S&P 500 and the tech-heavy Nasdaq Composite declined for three consecutive quarters, and both indexes have dropped into bear market territory. But rather than get out of the market, some wealthy hedge fund managers treated that sell-off as a buying opportunity.

In the third quarter, Louis Bacon Moore of Moore Capital Management added to his stake in CrowdStrike Holdings (CRWD 2.03%), which now ranks as his fifth-largest position. Meanwhile, Stephen Mandel of Lone Pine Capital added to his stake in Taiwan Semiconductor Manufacturing (TSM 1.26%), which ranks as his sixth-largest holding.

Are these two growth stocks worth buying given this fresh endorsement from some hedge fund billionaires?

1. CrowdStrike: A cybersecurity trailblazer

CrowdStrike was among the first companies to build a cloud-native cybersecurity platform, and it invented a new method of threat detection based on preventative indicators of attack, rather than relying on reactive indicators of compromise like other vendors. CrowdStrike also infused its products with artificial intelligence (AI) and engineered its platform to crowdsource data on an unmatched scale, making its AI models uniquely effective in preventing even the most sophisticated attacks.

Those innovations earned CrowdStrike a reputation for industry-leading threat detection, but it distinguished itself in other ways as well. Most notably, its portfolio comprises 22 modules -- spanning from endpoint and cloud security to threat intelligence and observability -- meaning customers can replace multiple-point solutions with a single platform. Better yet, all 22 modules are delivered through a single software agent that can be installed without a device reboot. That quality is unique to CrowdStrike, and it greatly simplifies adoption for customers.

Not surprisingly, CrowdStrike is growing at a furious pace. Its customer count increased 51% over the past year, and the average customer increased spending by more than 20% during that time period. In turn, revenue soared 61% to $1.8 billion, and free cash flow (FCF) climbed 49% to $543 million, representing a solid FCF margin of 29%.

Cybersecurity industry analysts recognize CrowdStrike as a leader across several verticals, including corporate endpoint security, incident response services, threat intelligence, and managed detection and response. Furthermore, the company showcased its ability to innovate on countless occasions. CrowdStrike recently debuted LogScale, a new module that provides real-time visibility across an organization's applications and infrastructure. LogScale goes beyond security, entering the realm of performance monitoring and observability.

With that in mind, CrowdStrike puts its addressable market at $97 billion in 2025, and its track record of financial execution and product innovation should give investors confidence. With shares trading at 18.1 times sales, a discount to the three-year average of 36.4 times sales, this growth stock is indeed worth buying today.

2. TSMC: The largest contract chip manufacturer

Taiwan Semiconductor Manufacturing (TSMC) is the world's largest semiconductor foundry, meaning it manufactures chips designed by other companies. TSMC works with a number of clients at the forefront of their respective industries, including Amazon, Apple, Nvidia, and Qualcomm. And it produces semiconductors for a broad range of end markets, including smartphones, high-performance computing, consumer electronics, and the internet of things.

As of the second quarter, TSMC held 56% market share among foundries, more than quadruple the next-closest competitor, according to Counterpoint Research. And investors have two good reasons to believe the company can maintain its leadership. First, semiconductor manufacturing is highly capital-intensive, creating a barrier to entry for new competitors. Second, TSMC has consistently set the pace for innovation in the industry.

That competitive edge fueled strong financial results over the past year. Revenue climbed 33% to $71.7 billion and FCF soared 71% to $17.2 billion. That said, the difficult economic climate will likely result in slower growth through the first half of 2023, driven by softening consumer demand in end markets like smartphones and personal computers.

However, the economic environment will normalize in time, so investors should focus on the big picture. TSMC is a critical link in the semiconductor supply chain, and it should benefit as customers like Apple and Nvidia continue to churn out new products. In fact, management says revenue will grow at an annualized pace of 15% to 20% over the next several years.

As a final thought, Stephen Mandel wasn't the only billionaire to invest in TSMC during the third quarter. Warren Buffett also started a position in the company. And with shares currently trading at 5.8 times sales, a discount to the three-year average of 8.6 times sales, this is an attractive buying opportunity.