As 2022 demonstrated, investing on Wall Street can, at times, be challenging. Following a year that saw the major U.S. stock indexes rocket to multiple record-closing highs, all three indexes plunged into a bear market last year. The growth-heavy Nasdaq Composite (^IXIC +1.52%) took the brunt of the pain, with a loss of 33%.
The good news for patient investors is there's always a light at the end of the tunnel. Although we'll never be able to accurately forecast when downturns will occur, how long they'll last, or ultimately where the precise bottom will be, we do know that all of the major indexes increase in value over long periods -- including the Nasdaq Composite. It effectively means that every sizable downturn in the stock market is a buying opportunity for long-term investors.
Image source: Getty Images.
But you don't have to settle for simply matching Wall Street's returns. Buying stakes in game-changing businesses during the Nasdaq downturn -- the Nasdaq Composite has bounced more than 20% from its lows, but remains well off of its November 2021 high -- can give investors a chance to significantly outperform the broader market. What follows are four one-of-a-kind growth stocks you'll regret not buying in the wake of the Nasdaq bear market dip.
Meta Platforms
The first unique growth stock that's begging to be bought in the wake of the Nasdaq bear market decline is social media company Meta Platforms (META +1.81%). Although the advertising environment is challenging given the increasing likelihood the U.S. will enter a recession in the not-too-distant future, Meta remains historically inexpensive and has numerous tailwinds in its sails.
NASDAQ: META
Key Data Points
Despite all the attention given to the company's metaverse ambitions, it's Meta's social media assets that continue to steal the show. Facebook, WhatsApp, Instagram, and Facebook Messenger are four of the most consistently downloaded social media apps globally. Collectively, these sites helped Meta attract 3.81 billion unique users each month during the March-ended quarter. In short, Meta's social media real estate is drawing more than half of the world's adult population to at least one of its sites each month.
Advertisers are well aware that Meta's social media sites give them the best chance to either reach as many eyeballs as possible or target their message(s). This is a big reason why Meta possesses substantial ad-pricing power more often than not.
To add to the above, the U.S. and global economy spend far more time expanding than in a recession. Since advertising is a cyclical industry, it means an ad-driven business such as Meta is going to see its top and bottom lines expand a disproportionate amount of the time.
Further, Meta Platforms has levers it can pull to improve its financial outlook. A good example is the company lowering its capital expenditures forecast for 2023 by $5 billion at the midpoint earlier this year. This reduced spending forecast, coupled with an up to $40 billion share repurchase program, is providing a nice lift to earnings per share.
NYSE: FVRR
Key Data Points
Fiverr International
Another one-of-a-kind growth stock that you'll regret not scooping up following a sizable drop in the Nasdaq Composite is gig economy player Fiverr International (FVRR +0.09%). Though the aforementioned possibility of a recession could, at least temporarily, weaken the labor market, Fiverr brings well-defined competitive edges to the table that set it apart from its peers.
The first factor working in Fiverr's favor (say that three times fast) is the permanent shift we're witnessing in the labor market. Despite some workers returning to the office following the worst of the COVID-19 pandemic, more people are choosing to work remotely than ever before. This meshes perfectly with Fiverr's online-services marketplace, which gives freelancers an opportunity to offer their services to buyers.
A second differentiating factor can be seen in the way Fiverr freelancers market their services on the platform. Whereas it's commonplace for freelancers to price their services at an hourly rate on competing platforms, Fiverr freelancers list their tasks/jobs as an all-inclusive price. The transparency of pricing on Fiverr has been paramount to increasing both the aggregate number of buyers on the platform as well as the average spend per buyer.
However, the best aspect of Fiverr is its take rate -- i.e., the percentage of each negotiated deal that Fiverr gets to keep. Ideally, Fiverr wants to keep as much as possible without reducing its base of freelancers or buyers. The company's take rate has been consistently climbing and reached 30.4% in the March-ended quarter. That's in the neighborhood of double that of its closest competitors.
Fiverr is a smart way to play the permanent shift to a hybrid workforce.
Image source: Getty Images.
Fastly
A third phenomenal growth stock you'll regret not adding to your portfolio during the Nasdaq swoon is edge cloud platform Fastly (FSLY 1.29%). Even with the possibility of a near-term economic slowdown, many of Fastly's key performance indicators are headed in the right direction.
Fastly is perhaps best known for providing infrastructure-as-a-service solutions. It's tasked with securely moving data from the edge of the cloud to end users as quickly as possible. Though we were seeing businesses move their data online and into the cloud prior to the pandemic, this shift has only accelerated over the past three years. It effectively means the demand for Fastly's core operations is only going to grow.
A number of key performance indicators suggest Fastly is making the right moves. Its total customer count has jumped from 2,695 at the end of June 2021 to an even 3,100 by March 2023. More importantly, enterprise revenue as a percentage of total sales has expanded from 89% to 91% over the past two years, with average enterprise customer spend increasing from $702,000 to $778,000.
To build on the above, Fastly's dollar-based net expansion rate (DBNER) has hovered between 118% and 126% over the past eight quarters. DBNER is a measure showing that the company's existing clients are spending between 18% and 26% more on a year-over-year basis. In other words, Fastly's existing clients spending more on its usage-driven model is what's fueling its growth.
Credit also goes to Todd Nightingale, who took over the CEO role in September 2022. Nightingale, who was previously the Executive Vice President and General Manager of Enterprise Networking and Cloud at Cisco Systems, has instilled a no-nonsense culture focused on belt-tightening and expanding existing client spending at Fastly.
NYSE: NEE
Key Data Points
NextEra Energy
The fourth one-of-a-kind growth stock you'll regret not buying in the wake of the Nasdaq bear market dip is electric utility NextEra Energy (NEE +0.17%).
Normally, an electric utility stock isn't going to find its way onto a list of growth stocks. Most electric utilities are slow-growing income plays. However, Wall Street expects NextEra to grow its earnings by an annual average of roughly 9% over the next five years. This comes on the heels of averaging more than 8% adjusted earnings growth since 2007. For all intents and purposes, NextEra Energy is a growth stock within the utility sector.
The good news for NextEra is that it benefits from the same protections and predictability as virtually every utility. For instance, most electric utilities are monopolies or duopolies in the areas they service. It's costly and time-consuming to build and deploy the infrastructure necessary to service residential homes and businesses. Without the ability for consumers to "shop around," their utility choices are limited.
Furthermore, demand for electricity doesn't change much from one year to the next. If you own or rent a home, there's a good chance you need electricity to power at least some of your appliances and/or your HVAC system. This leads to the predictability of cash flow that NextEra Energy generates.
However, the biggest differentiating factor for NextEra Energy is its focus on renewable energy. NextEra is currently generating 31 gigawatts (GW) of capacity from renewable energy sources, including 23 GW from wind and 5 GW from solar -- both of which are tops globally. Even though green-energy projects have been costly, they've helped to substantially lower electricity generation costs for the company and its customers. The end result is its aforementioned superior growth rate.
NextEra Energy is currently trading at its lowest forward-year price-to-earnings ratio in five years, which makes it a stellar growth stock to buy for patient investors.
