Though it can be a difficult realization to accept, stock market corrections and bear markets are perfectly normal parts of the investing cycle. Since the beginning of 1950, there have been 39 separate instances where the benchmark S&P 500 has corrected lower. Some of these instances can be sizable, such as when the growth-driven Nasdaq Composite (^IXIC -1.15%) shed 33% of its value in 2022.
On the other hand, every double-digit percentage decline in the major indexes, including the Nasdaq Composite, has proven to be a buying opportunity for patient investors. Despite never knowing when corrections or bear markets will start, how long they'll last, or how steep the decline will be, history does conclusively show that index-based losses associated with every decline are eventually cleared away by a bull market.
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Even with a small percentage of megacap tech stocks leading the charge higher in 2023, the Nasdaq Composite still sat more than 20% away from its all-time high as of last weekend. For investors with a long-term mindset, this represents an opportunity to pounce on innovative growth stocks trading at a discount.
What follows are four extraordinary growth stocks you'll regret not buying on the Nasdaq bear market dip.
Walt Disney
The first exceptional growth stock you'll be kicking yourself for not adding during the Nasdaq bear market swoon is theme-park operator and media giant Walt Disney (DIS -0.83%). For those of you scratching your head and wondering how Disney found its way onto a list of growth stocks, consider that Wall Street's consensus is for the company's earnings per share to more than double over the next four years.
Walt Disney was hit hard by the COVID-19 pandemic. Mitigation measures designed to slow or halt the spread of COVID-19 led to global theme-park shutdowns and significantly reduced attendance in movie theaters. But with the worst of the pandemic now over, Disney is well positioned to benefit from a rebound in all facets of its operations.
What makes Walt Disney such a special company are its intangibles. More specifically, other businesses can't duplicate the emotional engagements and imagination that Disney's characters, stories, and theme parks evoke. Its ability to transcend generational gaps with its stories and adventures gives Disney an irreplaceable lure with consumers.
Something else this lure provides is substantial pricing power. Since Disneyland opened in Southern California in 1955, the admission price to the park has jumped by 10,300%, or roughly 10 times the rate of inflation in the U.S. over the same period.
To build on this point, Walt Disney has also had little trouble passing along price increases to its streaming subscribers. After zooming to 164 million Disney+ subscribers in less than three years postlaunch, the company has shed a mere 6 million of these since it began raising monthly subscription prices. This demonstrates the power of the Disney brand, and also puts this future growth-driver (i.e., streaming) on a path to profitability by as early as next year.
Lovesac
A second extraordinary growth stock that's begging to be bought during the Nasdaq bear market drop is furniture company Lovesac (LOVE 4.29%).
I'm not afraid to admit that just saying the phrase "furniture stock" is enough to make me sleepy. The furniture industry is traditionally slow growing and highly dependent on foot traffic into brick-and-mortar stores, and true product differentiation is hard to come by. Lovesac is attempting to completely alter this perception with its products and sales platform.
As noted, it all starts with the company's products. Approximately 90% of its net sales come from "sactionals," which are sectional-styled modular couches that can be rearranged dozens of ways to fit most living spaces. Aside from being highly functional, sactionals can be fitted with an assortment of upgrades (e.g., surround sound and wireless charging stations), come with over 200 different cover choices, and the yarn used in these covers is made entirely from recycled plastic water bottles. In short, there isn't anything on the market quite like what Lovesac offers.
In addition, Lovesac's core customer tends to be financially well-off. Although sactionals are pricier than traditional couches, consumers with higher incomes are less likely to alter their buying habits if the prevailing inflation rate rises or the U.S. economy weakens. In other words, Lovesac finds itself in a better position to navigate potential economic weakness than other furniture companies.
However, the biggest differentiator of all might be the company's omnichannel sales platform. In addition to having a physical store presence in 40 states, Lovesac has partnered with a handful of major retailers to offer in-store or online showrooms. It also has a sizable direct-to-consumer presence, which is helping to lower its overhead expenses.
Image source: Getty Images.
Teladoc Health
The third awe-inspiring growth stock you'll regret not scooping up during the Nasdaq bear market decline is telemedicine company Teladoc Health (TDOC 0.08%).
Teladoc had a miserable 2022, and that's putting things nicely. The company took three mammoth write-downs totaling $13.4 billion that were tied to its, in hindsight, grossly overpriced acquisition of applied health signals company Livongo Health in 2020. While admitting it made a poor acquisition isn't ideal, the company's management team has bitten the bullet and put this goodwill in the rearview mirror. In simpler terms, Teladoc's year-over-year operating performance should be a lot cleaner moving forward.
Some skeptics have harped on Teladoc Health for being nothing more than a fad company that benefited from the COVID-19 pandemic. While it is true that virtual visits spiked during the pandemic as people were coerced to stay home, the company's operating performance prior to the pandemic shows it's not a fad. Annual revenue growth averaged 74% between 2013 and 2019, and annual sales growth is still expected to hold near the low double-digits.
The reason Teladoc's sales keep marching higher is that it's completely changing the way personalized care is administered. Although not all patient-doctor interactions will qualify for a virtual visit, telemedicine is giving all parties a pathway to improve the treatment process. Patients gain convenience, while physicians now have a tool to keep closer tabs on patients with chronic illnesses. For insurers, telemedicine is a tool that can improve patient outcomes and lower their out-of-pocket expenses.
One last thing to note about healthcare stocks like Teladoc is that they're highly defensive. Since we have no control over when we become ill or hurt, demand for healthcare services should be consistent in any economic environment.
Nio
A fourth extraordinary growth stock you'll regret not buying on the Nasdaq bear market dip is none other than China-based electric-vehicle (EV) manufacturer Nio (NIO 2.62%).
Similar to Walt Disney, Nio's biggest hurdle has been the pandemic over the past couple of years. Being based in China meant dealing with the controversial zero-COVID strategy, which led to unpredictable lockdowns and ongoing supply chain problems. However, with China abandoning its zero-COVID mitigation strategy in December, supply chain woes should begin to ease.
What will separate Nio from an ever-growing number of EV manufacturers is its traditional and nontraditional innovation. In terms of the former, Nio has been introducing at least one new EV annually. Last year, the company's ET7 and ET5 sedans hit showrooms and quickly became the company's most-popular delivered EVs. With the top battery pack available, Nio touts 621 miles of range (1,000 kilometers) for its sedans.
On top of introducing new EVs each year, the company is also refreshing its existing lineup with its NT 2.0 platform. This next-generation platform is a major step forward in advanced driver assistance systems for Nio and can allow for optimal lane selection, the passing of slower vehicles, and automatic ramp entry and exit on the highway. My suspicion is the short-term drop-off in older model sales we've recently witnessed has to do with future buyers wanting the NT 2.0 platform.
Nio has also been making noise with its out-of-the-box innovation for nearly three years. During the pandemic, it introduced its battery-as-a-service subscription, which allows buyers to charge, swap, and upgrade their batteries, as well as receive a discount on the initial purchase price of their Nio EV. This subtle program is putting high-margin recurring revenue in Nio's pockets and, more importantly, locking in new buyers to the brand for the long run.
