Last year was one of the most difficult years on record for investors. The benchmark S&P 500 produced its worst six-month return since 1970, while the bond market experienced its worst year ever. But it was growth stocks that really took it on the chin, with the Nasdaq Composite plunging as much as 38% from its November 2021 peak.
While steep bear market declines can be unnerving and test the resolve of investors to stay the course, history is pretty clear that bear markets are the perfect time to put your money to work. It can be a particularly smart time to buy game-changing growth stocks that've been weighed down by poor investor sentiment.
What follows are five spectacular growth stocks that can make you richer in 2023.
Image source: Getty Images.
Baidu
The first phenomenal growth stock that can make you richer in the new year is China-based internet search behemoth Baidu (BIDU 0.98%). Although China's zero-COVID strategy has been a thorn in Baidu's side for two years, a loosening of those restrictions should allow all of the company's operating segments to thrive.
Baidu's cash cow has long been its internet search engine. According to data from GlobalStats, Baidu has accounted for between 60% and 87% of China's internet search market share over the trailing year. Given the restrictions businesses face operating in China, this majority share of the search market is well protected. This makes Baidu the logical choice for advertisers looking to target users with their message. If China's economic growth picks up as the zero-COVID strategy is wound down, Baidu's ad-pricing power is likely to improve.
Equally exciting for Baidu are its aggressive investments in artificial intelligence (AI). Baidu subsidiary Apollo Go is the largest autonomous vehicle company in the world, and its AI-driven cloud-computing segment has delivered exceptional sales growth during a challenging period for China. The company's non-marketing revenue, which is driven by its AI initiatives, soared 25% in the third quarter from the comparable period in 2021.
Baidu is also exceptionally cheap for a growth stock. Despite a rich history of double-digit sales growth, shares of the company can be purchased right now for just 12 times Wall Street's consensus earnings for 2023.
Okta
A second surefire growth stock that can build your wealth in 2023 is cybersecurity company Okta (OKTA -0.65%). Following a miserable year that was marked by wider-than-expected losses tied to its acquisition of Auth0, this year should feature an abundance of catalysts for Okta.
On a macro level, it's important to recognize that cybersecurity has become something of a basic necessity for businesses of all sizes. No matter how well or poorly the U.S. economy and stock market perform, hackers are always trying to steal sensitive information. With businesses accelerating the shift of data into the cloud in the wake of the pandemic, Okta is well positioned to generate predictable subscription sales.
One of the bigger company-specific catalysts this year is putting its one-time integration expenses with Auth0 in the rearview mirror. While it's taken a bit longer than expected to put the puzzle pieces together, Auth0 expands Okta's identity verification offerings, and it most importantly provides a path for the combined company to generate sales outside of the U.S. In my view, this acquisition is key to sustaining a sales growth rate of more than 20% for many years to come.
Lastly, don't overlook Okta's reliance on AI. The company's identity verification platform is cloud-native and leans on AI to become more effective at identifying possible threats. With a subscription backlog of $2.85 billion, I'd make the assumption that customers value its solutions.
Image source: Pinterest.
The third spectacular growth stock that can make you richer in the new year is social media company Pinterest (PINS -0.52%). Even though weaker ad spending has weighed on social media stocks over the past couple of quarters, Pinterest has clearly identifiable competitive advantages that'll help it navigate short-term economic weakness.
To begin with, Pinterest has shown minimal signs of ad weakness, even though its monthly active user (MAU) count of 445 million was essentially flat on a year-over-year basis in the third quarter. Average revenue per user (ARPU) globally jumped 11%, with the highest ARPU growth registered in emerging markets. This data demonstrates that advertisers are still willing to pay a premium to get their message in front of Pinterest's veritable army of shoppers.
Another key point about Pinterest that's oft-overlooked is the company's operating model. Whereas most social media platforms rely on likes and other data-tracking tools to help advertisers target users, the entire premise of Pinterest's platform is to have users willingly and freely share what things, services, and places they like. This is what helps Pinterest serve important data to advertisers on a silver platter, all while maintaining strong ad-pricing power.
The company's balance sheet is also swimming with capital. Pinterest closed out September with approximately $2.67 billion in cash, cash equivalents, and marketable securities. This should be more than enough to cover ongoing innovation expenses while also buffering the company's stock from short-term economic weakness.
Cresco Labs
The fourth incredible growth stock with a solid chance to make you richer in 2023 is U.S. marijuana stock Cresco Labs (CRLBF 2.49%). Though Capitol Hill has failed (on numerous occasions) to pass federal cannabis reforms, multi-state operators (MSOs) like Cresco Labs have demonstrated they can still succeed in the roughly three-quarters of all states that've legalized marijuana in some capacity.
Like most MSOs, Cresco's juiciest margins are coming from its retail operations. Though it has 54 retail licenses spanning 10 states, most of the company's attention of late has been spent expanding into limited-license markets, such as Illinois, Pennsylvania, and Massachusetts. States where regulators limit dispensary license issuance allow smaller players like Cresco the opportunity to build up their brands and gain a following.
The transformative catalyst for Cresco Labs in 2023 is the expected closing of its all-stock acquisition of MSO Columbia Care. Even after divesting a dozen combined dispensaries and production assets to satisfy regulatory concerns, the new company will have more than 120 operating dispensaries and a presence in 18 legalized states. This transaction should put the company on a path to profitability.
Don't forget about Cresco Labs' industry-leading wholesale operations, either. Despite wholesale cannabis producing lower margins than traditional retail cannabis, Cresco has volume on its side. It holds a cannabis distribution license in California, the top state for legal weed sales. This license allows Cresco to place its proprietary products in more than 575 dispensaries throughout the state.
Visa
The fifth and final spectacular growth stock that can make you richer in 2023 is payment processor Visa (V 0.33%). While concerns about a possible U.S. or global recession have been mounting and are weighing on cyclical stocks, Visa has the tools and intangibles necessary to overcome these headwinds.
For instance, whereas inflation has been a negative for most sectors and industries, it's generally a positive for Visa. Since it's a fee-driven business, consumers and businesses having to buy basic necessities at higher price points can increase Visa's sales and profits. Further, as the price for goods and services has risen, the U.S. personal saving rate has fallen dramatically. As a result, credit card usage has climbed.
Visa finds itself in the highly lucrative pole position in the greatest market for consumption on the planet (the U.S.). In 2021, it accounted for nearly 53% of credit card network purchase volume in the U.S., and as I've stated previously, it was the only major payment processor in the U.S. to significantly grow its market share following the Great Recession.
What's more, Visa is shielded from the brunt of economic downturns by its strategic decision to avoid lending. By sticking to payment processing, Visa doesn't have to worry about the rise in loan losses that typically accompany a recession or economic slowdown. Not having to set aside capital allows Visa to bounce back from recessions much faster than its peers.
