When given time, Wall Street is a bona fide money machine. But over shorter timelines, directional movements in the broader market are unpredictable, as the past couple of years have demonstrated.
Since the start of 2020, the major stock indexes have navigated two bear markets, with the growth-stock-driven Nasdaq Composite taking the brunt of the pain. Last year, the index primarily responsible for pushing Wall Street to new heights in 2021 shed 33% of its value.
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But when there's pain on Wall Street, there's always opportunity for long-term investors to pounce. Though we'll never be able to accurately pinpoint when downturns will occur or where the bottom will be, we do know that every major decline throughout history has eventually been cleared away by a bull market rally. This holds true for the Nasdaq Composite, which closed the previous week nearly 18% below its all-time closing high, set in mid-November 2021.
What follows are four perfect growth stocks you'll regret not buying in the wake of the Nasdaq bear market dip.
Visa
The first ideal growth stock you can confidently add to your portfolio with the Nasdaq still well below its record-closing high is payment processor Visa (V -0.23%). Although Visa, like most financial stocks, is cyclical, and would therefore struggle if U.S. economic growth slows or shifts into reverse, it also sports a clear list of competitive advantages.
To start with, it is a beneficiary of patience. Of the 12 U.S. recessions that have occurred since World War II ended, just three have lasted at least 12 months, and none have extended beyond 18 months. By comparison, nearly every period of expansion has lasted multiple years, if not a full decade.
Even though recessions are a normal and expected part of the economic cycle, they clearly take a back seat to long-winded expansions. That's excellent news for a company that thrives on fees tied to consumption.
Speaking of consumption, Visa is the undisputed leader in purchase volume on credit card networks in the United States. In 2021, it held a nearly 53% share, which was about 29 percentage points ahead of its next-closest competitor, Mastercard. Being on the pole position in the world's top market for consumption is an enviable place to be.
But don't overlook the company's opportunity in international markets. Many of the fastest-growing emerging markets remain underbanked, which provides Visa with a pathway to sustained double-digit growth. And it has been willing to reach into its pockets to acquisitively push into new regions, just as it did with the buyout of Visa Europe in 2016.
Lastly, Visa's avoidance of lending is key to its financial stability. By strictly sticking to payment processing, it avoids the pain associated with loan losses and credit delinquencies during recessions. Not having to set aside capital for potential losses allows Visa to rapidly bounce back from economic downturns.
Western Digital
A second perfect growth stock you'll be kicking yourself for not buying following the Nasdaq bear market drop is memory and storage solutions specialist Western Digital (WDC 2.77%). Despite losing quite a bit of money at the moment, the company has all the puzzle pieces in place to surprise in the coming three to five years.
Looking out multiple years, enterprise cloud demand is Western Digital's biggest catalyst. With enterprise cloud spending still in its very early innings, demand for storage in data centers is only going to grow over the long run. While competition is fierce and pricing can, at times, be commoditized, the demand arrow for enterprise storage solutions is decisively pointing higher.
To add to the above, Western Digital has an opportunity to completely reshape how businesses store their data. While hard-disc drives have been the longtime standard, Western Digital NAND flash-memory solutions could become a staple in enterprise data centers within the coming years. Higher transfer rates and non-volatile mass storage are just two reasons NAND flash memory can be a serious growth driver by mid-decade.
Given a slowdown in personal-computing sales and a modest reset in enterprise spending over the past year, Western Digital has responded by reducing its operating expenses by a double-digit percentage. Although the company is losing money as noted, these cost cuts should help assuage some near-term cyclical pain.
Western Digital is also cheap. For those willing to the look to the horizon, shares of the company can be picked up for less than 8 times Wall Street's forecast earnings in fiscal 2026 (the company's fiscal year usually ends around June 30).
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Jazz Pharmaceuticals
The third superb growth stock you'll regret not scooping up following the Nasdaq bear market swoon is biotech company Jazz Pharmaceuticals (JAZZ 1.89%). Though the drug-development arena can be competitive, Jazz has well-defined advantages that should allow it to excel.
Before digging into company specifics, you should know that demand for drugs, devices, and healthcare services are relatively inelastic. In other words, no matter how well or poorly the U.S. economy performs, patients who needed lifesaving or life-improving therapies yesterday are liable to need them in the future, too. This leads to highly predictable cash flow for profitable drug developers like Jazz.
On a company-specific basis, Jazz Pharmaceuticals also benefits from its targeting of orphan and rare diseases. While there are risks associated with developing therapies to treat a small group of patients, approved drugs often face little or no competition. And health insurers rarely push back against high list prices for rare- and orphan-disease drugs. Translation: Jazz has exceptional drug-pricing power.
For now, the star of Jazz's portfolio is sleep-disorder drug Xywav, a next-generation version of its former blockbuster Xyrem. Xywav contains 92% less sodium than Xyrem, making it a considerably safer option for patients with higher cardiovascular risk factors. Jazz's oxybate franchise (Xywav and Xyrem) could make a run at $2 billion in annual sales as early as next year.
But there's plenty of excitement elsewhere in Jazz's pipeline. This includes label expansion opportunities for cannabidiol-based drug Epidiolex, which can eventually surpass $1 billion in annual sales, as well as the company's oncology portfolio. Growth from Rylaze, which is approved to treat acute lymphoblastic leukemia and lymphoblastic lymphoma, should help Jazz's oncology segment reach $1 billion in full-year sales in 2023.
With double-digit annualized earnings growth through 2026, Jazz shares look like an absolute steal at less than 7 times forward-year earnings.
Nio
A fourth perfect growth stock you'll regret not buying in the wake of the Nasdaq bear market dip is China-based electric-vehicle (EV) manufacturer Nio (NIO 8.72%). Following a myriad of supply chain issues over the past couple of years, Nio looks ready to stomp on the accelerator.
One of the biggest problems for Nio had been China's extremely stringent COVID mitigation measures, which led to widespread supply chain disruptions. Thankfully, regulators abandoned the so-called "zero-COVID" strategy in December, which reopened the world's No. 2 economy. Though it'll take some time for China to ramp up, Nio's supply chain constraints should steadily melt away.
We're already beginning to see evidence that China's reopening is having a positive impact on Nio. In July and August, it delivered 20,462 EVs and 19,329 EVs, respectively. Management had previously predicted that it could likely hit 50,000 EVs in monthly production without supply constraints. Averaging around 20,000 monthly EV deliveries after months hovering around 10,000 deliveries is a very positive step in the right direction.
Another reason investors can be excited about Nio is the rollout of its next-generation platform, known as the NT 2.0, which provides updated driver assistance technologies. The fact that sales of Nio's EVs tapered off and then picked up significantly as the NT 2.0 rolled out suggests that consumers were eager and waiting for the company to upgrade its vehicles.
Lastly, Nio has done a phenomenal job of keeping early buyers loyal. The battery-as-a-service program that was introduced in August 2020 allowed buyers of its EVs to charge, swap, and upgrade batteries in the future, in exchange for a monthly subscription fee. This subscription represented a way for the company to trade off some near-term revenue for additional EV purchases and high-margin subscription revenue down the line.
