Putting your money to work on Wall Street is bound to have its ups and downs. In successive years since the beginning of the decade, the three major stock indices have traded bearish positions and bull marketswith growth driven by stocks Nasdaq Composite (^IXIC -1.16%) hesitating more.
During the 2022 bear market, the Nasdaq Composite rose the caboose. It lost 33% of its value, which represented a noticeably worse performance than the Dow Jones Industrial Average and S&P 500. But since early 2023, the Nasdaq has been leading the trend. It is up more than 55% in just over 14 months and recently surpassed its previous record, which was set in November 2021.
Image source: Getty Images.
But don't think for a moment that just because the Nasdaq Composite is breaking records, deals still can't be found. With the "Magnificent Seven" doing most of the heavy lifting, the bargains among growth stocks They can still be discovered for long-term opportunistic investors.
What follows are four impressive growth stocks you'll regret not buying in the new Nasdaq bull market.
Visa
The first great growth stock that will get criticized for not adding to your portfolio, even as the Nasdaq hits new highs, is the payment processing company. Visa (V 0.64%).
All companies face headwinds, even industry leaders like Visa. The "enemy" of financial stocks is recessions. Financial companies are cyclical and normally depend on economic growth to expand their results. If you select Money-based metrics and predictive indicators. are accurate, the U.S. economy could fall into a recession later this year, which would almost certainly curb spending and reduce the number of aggregate consumer and business transactions.
However, it makes a lot of statistical sense to remain optimistic about the US economy. While three-quarters of all recessions since 1945 have resolved in less than a year, most expansions in the same span have persisted for several years, if not a full decade. Companies like Visa are ideally positioned to take advantage of the natural expansion of the US and global economy over time.
At a more company-specific level, Visa is the Undisputed leader in purchase volume in the credit card network. in the U.S. It has a nearly 42% share and was the only major payment processor to enjoy a significant share expansion after the Great Recession.
Additionally, it has a long way to go to expand its payments infrastructure to foreign markets. Africa, Southeast Asia and the Middle East remain largely underbanked, and cross-border volume has been the fastest source of consistent Visa payments growth.
The final piece of the Visa puzzle is that remains strictly a payment processor. During recessions, lending institutions have to reserve capital to cover delinquencies and potential credit losses. Since Visa doesn't make loans, you have superior financial flexibility and few profit margin hurdles.
Lovesac
A second impressive growth stock you'll regret not buying on the Nasdaq in a relatively young bull market is the furniture company. Lovesac (LOVE 2.44%). YeahI just used "furniture company" and "growth stock" in the same sentence.
Generally speaking, the furniture industry is slow growing, highly cyclical, and dependent on foot traffic to physical stores. It's an industry that's been ripe for disruption for a long time... and Lovesac has answered the call.
Lovesac's most notable differentiating factor is its furniture. Nearly 90% of the company's net sales can be traced back to its "sactionals": modular sofas that can be rearranged in dozens of ways to fit most living spaces. The thread used in the saccionals is made from recycled plastic water bottles, which speaks to the environmental friendliness of the product. Meanwhile, Saccionals have over 200 different coverage options, ensuring they will match the color or theme of any room.
In addition to functionality, optionality and respect for the environment, Lovesac pricing provides a competitive advantage. With the ability to add wireless charging and surround sound, sectional sofas tend to be more expensive than traditional sectional sofas. But this is precisely what management wants. Lovesac's target customer tends to have higher incomes and is therefore less likely to alter their spending habits during periods of minor economic disruption.
Lovesac's omnichannel sales platform It is another reason for its success. Although it has brick-and-mortar stores in 40 states, the company relies on its online presence, pop-up showrooms, and select brand partnerships to keep its inventory levels in check and reduce its overhead expenses. The result has been superior margins among furniture stocks.
Lovesac appears to be a bargain at 10 times next year's earnings.
Image source: Getty Images.
Intel
The third surprising growth stock I wish I had bought during the early stages of the Nasdaq bull market is semiconductor stocks Intel (INTC -4.66%).
If there's one knock against Intel, it's the company's historical reliance on legacy central processing units (CPUs). With seemingly all investors focused on artificial intelligence (AI) right now, the slower growth rates and highly cyclical sales trajectory of CPUs in personal computers (PCs) have weighed on Intel stock performance .
On the other hand, Intel's legacy segments remain cash cows. Even after losing some of its data center and PC CPU market share to its main rival. Advanced Micro Devices, Intel remains the dominant PC CPU supplier. The cash Intel generates from these segments can be reinvested in higher growth initiatives for the company.
One of these intriguing opportunities lies in AI. Intel introduced its Gaudi3 AI chip in December, with the goal of rolling it out to customers in 2024. Gaudรญ3 will compete with NVIDIAAI's flagship H100 graphics processing unit (GPU), used in AI-accelerated data centers to power generative AI software.
Intel is also diversifying its revenue stream by significantly expanding its foundry services segment. It plans to open two chip manufacturing plants in Ohio by 2026 or 2027, as well as one in Germany in the second half of the decade. By 2030, Intel could become the world's second largest foundry.
Despite being a stalwart among chipmakers, Intel is definitely a growth stock. Between 2023 and 2027, earnings per share are expected to catapult from a reported $1.05 to an estimated $4.44.
Metaplatforms
A fourth impressive growth stock you'll regret not buying into the new Nasdaq bull market is none other than social media titan Metaplatforms (GOAL -1.22%).
Like Visa, recessions tend to be Meta's biggest concern. Last year, nearly 98% of its $134.9 billion in total sales came from advertising. It is common for companies to reduce their advertising spending when the U.S. economy weakens or shows signs of weakness ahead. Fortunately, periods of economic expansion last much longer than recessions, allowing advertising-driven businesses to thrive.
Meta's core operating segment is its basket of leading social networking sites. Facebook is the most visited social destination in the world, with 3.07 billion monthly active users (MAU). Adding in other very popular sites, including WhatsApp, Instagram and Threads, the Meta family of apps attracted just 4 billion MAUs during the quarter ended in December. Since Meta gives businesses access to more eyeballs than any other social platform, it is often able to exert strong advertising pricing power.
Another reason investors can be confident in the future of Meta Platforms is its superior cash position and cash flow. The company closed 2023 with $65.4 billion in cash, cash equivalents and marketable securities, adding to the $71.1 billion in net cash generated from operating activities during the year. Meta's advertising platform, the source of revenue, allows the company to take risks that few companies can afford.
One of the growth initiatives that CEO Mark Zuckerberg is particularly excited about is the development of virtual/augmented reality devices, in addition to supporting almost anything to do with the metaverse. Although Meta's Reality Labs segment is losing money hand over fist, Zuckerberg is positioning his company to be an on-ramp to 3D virtual environments for the second half of the decade.
Last but not least, Metaplatforms are still cheap. Despite a five-fold rise from its 2022 bear market low, the stock can be bought for less than 14 times forward-year cash flow, which represents a modest discount to the company's average multiple to cash flow over the year. period of the last five years.
