The past year has been a night-and-day difference for Wall Street. One year ago, historically low interest rates were fueling a boom in growth stocks that seemed to have no end in sight, and the growth-driven Nasdaq Composite (^IXIC 2.02%) was hitting a fresh all-time high above 16,000. Today, the Nasdaq is mired in a bear market thanks to the Federal Reserve raising interest rates at its fastest clip in decades.
While there's little question that a peak 38% decline in the Nasdaq Composite has tested the conviction of growth stock investors, it's also rolled out the red carpet to those with cash on hand and a long-term mindset. After all, every correction, crash, and bear market in the Nasdaq Composite throughout history has eventually been erased by a bull market rally.
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The 2022 Nasdaq bear market is an especially good time to go bargain hunting for top-tier growth stocks. What follows are five impressive growth stocks you'll regret not buying during the Nasdaq bear market dip.
Alphabet
The first awe-inspiring growth stock you'll regret not scooping up during the Nasdaq bear market decline is Alphabet (GOOGL 10.22%) (GOOG 9.96%), the parent company of YouTube, Waymo, and internet search engine Google. In spite of potentially weak ad spending in the near term, Alphabet has unsurpassable competitive advantages that should make its patient shareholders notably richer over time.
Alphabet's cash cow continues to be Google. Although internet search revenue ebbs and flows with the health of the U.S. and global economy, periods of economic expansion last considerably longer than recessions. Given that Google has accounted for at least 91% of worldwide internet search share looking back more than two years, it's a good bet to command superior pricing power with advertisers for a long time to come.
Equally important to Google is what Alphabet is doing with the cash it's generating from its leading search engine. Some of this capital is being invested into streaming platform YouTube, which is now the second most-visited social site in the world. Monetizing YouTube Shorts is just one of the many ways Alphabet aims to move the needle for one of its most prized assets.
Furthermore, Google Cloud was responsible for 9% of global cloud-service spending during the third quarter, according to estimates from Canalys. Google Cloud's share of the market is growing, and by mid-decade this segment could be well on its way to becoming a leading cash-flow driver for Alphabet.
Okta
A second top-tier growth stock you'll be kicking yourself for not buying at a huge discount is cybersecurity company Okta (OKTA -0.69%). Although wider losses associated with its Auth0 acquisition stick out like a sore thumb in a bear market, Okta has the puzzle pieces in place to become a big-time player in the identity verification arena.
Okta's biggest advantage might just be the evolution of the cybersecurity industry. Over the past quarter of a century, protecting sensitive information from hackers and robots has shifted from being a luxury to a necessity for businesses of all sizes in any economic environment. This means cybersecurity solutions are just as important in a bear market as in long-winded bull markets.
Okta's advantage in identify verification is its cloud-native, artificial intelligence (AI)-reliant platform. Since it was designed in the cloud and leans on AI, Okta's identity platform is uniquely positioned to more quickly and effectively recognize threats, as well as ensure that only authorized people have access to select data.
The Auth0 buyout will also come in handy for Okta, even though integration issues and share-based compensation have increased the company's near-term losses. Not only does Auth0 expand Okta's service offerings and clientele, but it provides a pathway to expand internationally, which'll be key if Okta can sustain a double-digit growth rate for years to come.
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Intuitive Surgical
The third impressive growth stock that you'll regret not adding during the Nasdaq bear market dip is robotic-assisted surgical system developer Intuitive Surgical (ISRG 0.59%). Despite the COVID-19 pandemic and U.S. economic weakness coercing some patients to postpone some optional surgical procedures, this is a company with well-defined operating advantages.
To begin with, Intuitive Surgical has installed more than 7,300 of its da Vinci surgical systems in hospitals and surgical centers worldwide. Nominally, this might not sound like a large figure, but it's considerably more than all of the company's peers.
To add to this point, da Vinci surgical systems cost between $0.5 million and $2.5 million and require surgeons to be trained to use them. The nominal and intangible investments that go into purchasing a da Vinci surgical system make it highly unlikely that buyers would ever switch to a competing platform. In other words, Intuitive Surgical's customers tend to remain clients for a long time.
But it's the company's razor-and-blades operating model that really makes it a tantalizing investment. Though its da Vinci systems are pricey, they're costly to build and don't generate the best margins. They do, however, keep customers coming back for instruments with each procedure and for regular servicing needs. Over time, the higher-margin instruments and servicing segments have become Intuitive Surgical's primary revenue drivers.
Cresco Labs
A fourth surefire growth stock that you'll regret not buying as the Nasdaq plunges is U.S. marijuana stock Cresco Labs (CRLBF 5.13%). Even though Capitol Hill has struggled to pass cannabis reform measures, a sizable number of state-level legalizations have rolled out the red carpet for companies like Cresco to succeed.
As of the end of September, Cresco Labs had 54 operating dispensaries spanning 10 legalized states. While some of these dispensaries were located in high-dollar markets, such as California, it's Cresco's push into limited-license markets that should raise eyebrows. Markets where license issuance is purposely being limited by state regulators should help ensure that Cresco is able to build up the value of its brands and garner a loyal following.
To build on the above, Cresco Labs is also nearing the finish line of its large acquisition of multi-state operator (MSO) Columbia Care. Though the two companies will be divesting about a dozen combined dispensaries and processing sites in order to satisfy regulators and complete the deal, it'll still be one of the largest MSOs in the country. All told, the new Cresco will have well over 100 operating dispensaries spanning 18 states.
A final differentiating factor for Cresco Labs is its wholesale cannabis operations. Most folks overlook wholesale weed because the margins are notably lower when compared to the retail side of the business. However, Cresco holds a lucrative cannabis distribution license in California, and therefore has a big-time volume advantage in its sails. It's able to place its proprietary products into more than 575 dispensaries throughout the Golden State.
Berkshire Hathaway
The fifth impressive growth stock that you'll regret not buying on the Nasdaq bear market dip is Warren Buffett's Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%).
What's Berkshire doing on a growth stock list, you ask? What if I told you that Buffett's company has been consistently growing its top line by a high-single-digit or low-double-digit percentage, with earnings growth solidly in the double-digits? It may not be an innovator like Intuitive Surgical or an industry leader like Alphabet, but it's a clear-cut growth company, and has been so for more than five decades.
One of the reasons Berkshire has performed so well is Warren Buffett's love of dividend stocks. Companies that pay a regular dividend have historically outperformed stocks that don't pay a dividend by a considerable amount. Over the next 12 months, Berkshire Hathaway is set to collect over $6 billion in dividend income, including preferred stock payouts.
The other big key to success for Berkshire Hathaway has been Warren Buffett and his investing team packing the company's investment portfolio and owned assets with cyclical businesses. As I noted earlier with Alphabet, periods of economic expansion usually last for years, while recessions are often over within a couple of quarters. Buffett has positioned Berkshire to take advantage of these long-winded periods of success -- especially as it pertains to Berkshire's technology and financial holdings.
