Last year, some of the market's top growth stocks plummeted. Investors fled these players due to a general preference for safety. All three major indexes slipped into bear territory, and rising inflation weighed on households and businesses.
Unfortunately, those economic problems won't disappear overnight. But the good news is they won't be around forever either. This year, some of the stocks most heavily hit by the market downturn could start to make a comeback. Others have already showed signs of a rebound. So, if you're looking for growth in 2023, here's where to invest $5,000.
A stock that has what it takes to rebound
A good way to make the most of your investment is through diversification. So, it's a smart idea to spread your $5,000 across a few different potential growth areas:
- stocks that got crushed last year but have what it takes to rebound
- stocks that fell but have started to recover
- stocks that beat the bear market and could continue to climb
I'll mention examples of each, but you don't have to stick to these only. You'll find many other good candidates out there that fit into these categories.
Let's start with the first: a stock that got crushed but is ripe for gains. An example is Etsy (ETSY +1.76%). The e-commerce platform connects the sellers and buyers of handmade goods. During the earlier days of the pandemic, Etsy shares soared, as people favored staying home to shop. Since then, as shoppers returned to stores, Etsy has faced more competition.
But here's a big reason to be optimistic about this company: Etsy's kept the gains it made during the pandemic. The marketplace's gross merchandise sales in the most recent quarter were $2.6 billion compared to $1 billion during the same quarter of 2019. And growth in new buyers is 50% higher than it was before the pandemic.
It's also important to remember that Etsy doesn't face as much pressure as other retailers from rising inflation and supply chain issues. That's because Etsy itself isn't the seller -- and its sellers are small businesses.
NYSE: ETSY
Key Data Points
Etsy shares fell 45% last year. And they're trading at 28 times forward earnings estimates, which looks cheap considering Etsy's earnings performance in tough times.
A stock that fell, but is recovering
Now, we'll move on to a stock that fell, but has started to rebound. Moderna (MRNA 0.83%) lost 29% last year. But over the past three months, it's gained 38%. Investors initially shied away because they worried about the biotech's coronavirus vaccine sales in a post-pandemic world.
NASDAQ: MRNA
Key Data Points
The shares rebounded as Moderna offered clues about the future vaccine market, and as investors considered the progress of other programs in its pipeline.
It's hard to value Moderna by traditional measures right now. That's because the vaccine market is in transition mode as the pandemic nears its later stages. But the vaccine is likely to continue bringing in blockbuster revenue -- and the company may launch two new products in the next couple of years. That makes the stock a great buy at today's level.
A stock that's beating the bear market
Finally, let's consider a stock that beat the bear market and has what it takes to rise further: Vertex Pharmaceuticals (VRTX 0.58%). Vertex rose 31% last year as investors bet on its ability to bring its latest product candidate -- one for blood disorders -- to market. The company has submitted the candidate to regulators, and decisions may happen in the coming months. Data were positive, so there's reason to be optimistic. Any good news could further lift the stock. And Vertex's billion-dollar cystic fibrosis portfolio is another reason to like this company.
NASDAQ: VRTX
Key Data Points
With $5,000 -- or even less -- you could pick up shares of each of these players. And, as mentioned above, there are many other stocks that offer similar opportunities.
The stocks I've suggested are ripe for a rebound -- or in some cases more gains -- this year. But, of course, it's impossible to guarantee an increase. So how can you invest without worrying? Be sure to invest for a period of at least five years, and in many cases the picture should turn out bright.
If these stocks deliver great returns in 2023, that's wonderful. And if they don't, they may still put a smile on your face over the long term.
