Perhaps the toughest realization all investors come to is that the stock market doesn't move up in a straight line -- even if we wish it would. Last year, all three major U.S. stock indexes were firmly entrenched in a bear market, with the growth-focused Nasdaq Composite (^IXIC -0.64%) hit hardest. The index directly responsible for pulling the broader market to new all-time highs in 2021 shed 33% of its value last year.
However, sizable declines in the Nasdaq Composite offer once-in-a-decade -- or perhaps once-in-a-generation -- opportunities to buy into industry-changing businesses at a discount. After all, every major decline in the Nasdaq Composite throughout history has, eventually, been cleared away by a bull market. This bear market will prove no different.
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For patient investors, bargains abound, especially among growth stocks. What follows are five superb growth stocks you'll regret not buying during the Nasdaq bear market dip.
Meta Platforms
The first surefire growth stock you'll be kicking yourself for not buying as the Nasdaq plunges is Facebook parent Meta Platforms (META -10.56%). Despite weaker near-term ad spending weighing on the company, Meta has well-defined macro trends and competitive advantages in its corner.
For example, three recession-probability indicators with flawless tracks records dating back more than a half-century suggest a U.S. recession is all but a given in the not-too-distant future. Although this is bound to weaken near-term enterprise ad spending, recessions are generally short-lived. By comparison, economic expansions usually last for years. This affords Meta exceptional ad-pricing power for a disproportionate amount of time.
To build on this point, Meta Platforms is still completely dominant among social media stocks. Facebook, Instagram, WhatsApp, and Facebook Messenger are consistently among the most-downloaded social media apps worldwide. During the fourth quarter, 3.74 billion people visited at least one of its owned assets daily. Advertisers understand that no other social media platform offers more eyeballs than Meta.
Additionally, Meta has levers it can pull to improve its operating performance and cater to shareholders following a rough year. The company's 2023 operating expenditures forecast came in $5 billion below the company's own prior projections (at the midpoint). Meta is also implementing a share buyback program totaling as much as $40 billion.
Investors who wrote off Meta Platforms in 2022 are likely to regret that decision.
Intuitive Surgical
A second magnificent growth stock that's ripe for the picking during the Nasdaq bear market decline is surgically assisted robotic systems developer Intuitive Surgical (ISRG -0.50%). Though companies with premium valuations don't often fare well during bear markets, Intuitive Surgical has a couple of tricks up its sleeve that can allow it to thrive.
To start with, healthcare stocks are naturally defensive. As much as we'd like to not get sick when it's not financially convenient, we don't have that choice. Demand for prescription drugs, medical devices, and various healthcare services tends to be pretty consistent in any economic environment.
Intuitive Surgical stands out for being the undisputed leader in surgically assisted robotic systems. In a little over two decades, it's installed more than 7,500 of its da Vinci surgical systems in hospitals and surgical centers worldwide. These are costly systems ($500,000 to $2.5 million) that require a lot of training for surgeons. In other words, Intuitive Surgical's customers tend to stick around for a long time, rather than jump to a competitor.
Best of all, this company is built on the razor-and-blades operating model. It hooks its clients when they purchase the pricey, but generally low-margin, da Vinci surgical system. Intuitive Surgical then reaps its juiciest margins from selling instruments and accessories for each procedure, as well as from servicing these systems. As its revenue mix shifts to these higher-margin channels, earnings growth should outpace sales growth.
Image source: Getty Images.
Okta
Another superb growth stock you'll regret not adding to your portfolio as the Nasdaq Composite plummets is cybersecurity specialist Okta (OKTA -0.89%). In spite of unsightly near-term losses tied to its ongoing integration of Auth0, Okta offers plenty of catalysts for long-term-oriented investors.
Keeping with the macro theme of this list, cybersecurity is also a very defensive industry. Hackers don't simply take time off from trying to steal sensitive information just because Wall Street or the U.S. economy are struggling. Since most cybersecurity companies are subscription-based, it tends to lead to highly predictable operating cash flow in any economic situation.
Okta specializes in identity verification. Its solutions were built in the cloud and lean on artificial intelligence (AI) to grow more efficient over time at recognizing and responding to potential threats. The company's Identity Cloud is designed to cover everything from devices and on-premises infrastructure to Internet-of-Things devices and remote cloud-based applications. Okta believes it has an $80 billion addressable market in identity verification, and it's just scratched the surface.
The big catalyst for Okta in 2023 is putting its one-time integration expenses from the Auth0 buyout in the rearview mirror. While this integration clearly could have been smoother, it nevertheless opens the door for the company to push its solutions into international markets. Moving beyond the U.S. is a big reason Okta can sustain a double-digit growth rate for many years to come.
Vertex Pharmaceuticals
The fourth amazing growth stock you'll regret not scooping up during the Nasdaq bear market is biotech leader Vertex Pharmaceuticals (VRTX -0.76%). Even with all of its products currently focused on one indication, Vertex has a winning formula for long-term investors.
Much like Intuitive Surgical, Vertex is a beneficiary of the healthcare sector being largely insulated from economic downturns. Patients don't suddenly stop taking their medications for life-threatening illnesses just because the winds of recession begin blowing. For drug developers like Vertex, it means very predictable cash flow year in and year out.
What makes Vertex special is the company's focus on treating patients with cystic fibrosis (CF), a genetic disease characterized by thick mucus production that can obstruct the lungs and/or pancreas. Although there's no cure for CF, Vertex has developed four generations of mutation-specific therapies designed to improve lung function.
The latest of these treatments, combination therapy Trikafta, was approved five months ahead of its scheduled review date with the U.S. Food and Drug Administration and is expected to be granted a label expansion in the U.S. this year for use in children as young as age 2. Trikafta is generating around an $8 billion annual sales run rate and targets the most common CF mutation (f508del).
Vertex Pharmaceuticals is also flush with capital. Its cash, cash equivalents, and marketable securities jumped $3.3 billion to $10.8 billion last year. This abundance of cash allows the company to finance ongoing internal research, outside collaborations, acquisitions, and even share repurchases.
Baidu
The fifth superb growth stock you'll regret not buying during the Nasdaq bear market dip is Chinese internet search behemoth Baidu (BIDU 0.72%). Although China stocks usually come with added risks, a key headwind for Baidu has recently dissipated.
For much of the past three years, the COVID-19 pandemic has been an insurmountable challenge for China-based companies. The government's zero-COVID mitigation strategy resulted in unpredictable lockdowns that crippled supply chains and led to product shortages. However, with regulators now allowing life to return to some semblance of normal, China's economy has a chance to really stretch its proverbial legs in 2023 and beyond.
Baidu's foundation continues to be its internet search engine. Over the trailing five years (ended January 2023), Baidu has accounted for between 59% and 87% of internet search share in China, according to data from GlobalStats. Just as Meta is the go-to for social media advertisers, Baidu is the clear choice for merchants wanting to reach users in China.
But Baidu's growth engine is about more than just internet search. This is a company that's betting big on AI. Baidu's non-marketing revenue, which includes its AI Cloud and intelligent driving operations, produced 25% year-over-year sales growth in what was a challenging third quarter.
With China reopening and AI flourishing, Baidu stock remains relatively inexpensive at 15 times Wall Street's consensus earnings for 2023.
