It's amazing what a difference a year can make on Wall Street. As the three major stock indices continued to oscillate between bear and bull markets in successive years, 2023 turned out to be a phenomenal year for bulls. Although he Dow Jones Industrial Average driven to a record level, it was the 43% annual gain for the Nasdaq Composite (^IXIC 0.09%) That stole the show.
But despite this incredible gain after 2022 bear market, the growth-driven Nasdaq has yet to eclipse its previous all-time high. At the closing bell on January 3, 2024, the Nasdaq remained more than 9% below its peak level.
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While short-term traders might consider the last 26 months a wasted period for growth stocks, long-term investors likely see this decline as an opportunity to jump. After all, every notable drop in the major indices has eventually (keyword!) has taken a back seat due to a bull market rally.
What follows are four top growth stocks you'll regret not buying in the wake of the Nasdaq bear market crash.
Palantir Technologies
The first stellar growth stock that will be punished for not picking up when the Nasdaq Composite is still a long way from its all-time closing high is the data mining company. Palantir Technologies (PLT -1.66%). Although Palantir trades at an aggressive earnings multiple (just over 50 times next year's earnings), it has well-defined competitive advantages that deserve a premium.
Palantir is best known for its Gotham platform. Gotham is a artificial intelligence (AI)- and a machine learning (ML)-based software-as-a-service (SaaS) solution that primarily helps the US federal government plan missions and collect data. Not only is there little concern about receiving payment, since the US government is their largest customer, but Palantir's land contracts typically last four or five years.. This leads to predictable cash flow and consistent double-digit sales growth.
A An even bigger long-term growth driver for Palantir It appears to be the company's Foundry platform. Foundry is Palantir's enterprise-focused SaaS solution incorporating AI and ML that helps businesses better understand their data so they can optimize their operations. Foundry is still very early in its progress, with enterprise customer numbers increasing 34% in the quarter ended September over the prior-year period.
Additionally, a combination of sustained double-digit sales growth and conscious cost reductions have propelled Palantir above the bar for recurring profitability. The third quarter marked the company's fourth consecutive quarter of generally accepted accounting principles (GAAP) revenue.
Lastly, but perhaps most importantly, Palantir Technologies has an irreplaceable operating model. No company comes close to bringing to the table what Palantir does at scale. That is why a considerable valuation premium can be endured.
JD.com
A second top growth stock you'll regret not adding to your portfolio following the Nasdaq bear market crash is based in China. ecommerce company JD.com (J.D. -1.77%). Although China's economic data has left much to be desired in recent months, JD is perfectly positioned to deliver for its patient shareholders.
One factor that is very much in JD's favor is the reopening of China's economy following the end of "zero Covid" mitigation measures. While these regulations were scrapped in December 2022, it is taking time for the world's second-largest economy to put supply chain issues in the rearview mirror. Fortunately, e-commerce is still in its relatively early stages of growth in China. Once the country's economy finds its rhythm, JD.com has the potential to generate sustained double-digit sales growth.
What really sets JD apart from its peers is the company's e-commerce operating model. While the leading e-commerce provider Ali Baba generates much of its revenue from third-party sellers, JD brings home the bacon to the predominantly acting as a true direct-to-consumer supplier. In other words, JD takes care of inventory and logistics. The advantage of this approach is that it gives JD much more control over its operating margin than Alibaba.
Another interesting thing about JD.com is the expected spin-off of two of its units: Real Estate and Industrial. Spinning off these segments and listing them on the Hong Kong stock exchange will not only potentially reduce any antitrust concerns, but will also make it easier for investors to understand how JD makes money.
With a Forward Price-Earnings (P/E) Ratio out of only 8, JD.com is ready to be chosen.
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AstraZeneca
A third exceptional growth stock you'll regret not buying after the Nasdaq bear market crash is pharmaceutical giant AstraZeneca (AZN -0.58%). After battling patent issues for what seemed like two decades, AstraZeneca is now firing on all cylinders with its broad portfolio of therapies.
The two areas of focus that have really taken the load up in recent years they are Oncology and Cardiovascular. AstraZeneca has four cancer drugs generating more than $1 billion in annual sales, three of which generated double-digit sales growth in constant currency during the first nine months of 2023 (Tagrisso, Imfinzi and Calquence). Meanwhile, type 2 diabetes drug Farxiga has delivered steady 40% growth in foreign currency sales through September and appears on track to eclipse Tagrisso as the company's top-selling drug.
This is a great time to mention that healthcare companies are operationally well insulated from Wall Street volatility and short-lived downturns. Since we have no control over when we get sick or what ailments we develop, the demand for prescription medications tends to be constant in any economic climate. Translation: AstraZeneca's operating cash flow is very predictable... and Wall Street loves predictability.
The other key to AstraZeneca's success is its 2021 acquisition of ultra-rare disease drug maker Alexion Pharmaceuticals. Although there are risks inherent in developing drugs aimed at very small groups of patients, there are also ample rewards for success. In addition to helping patients who previously had few or no treatment options, approved ultra-rare therapies face minimal pushback from insurers in terms of list price and often have little or no competition.
The icing on the cake for AstraZeneca is that Alexion developed a next-generation treatment (known as Ultomiris) for its blockbuster drug Soliris. This will lock in billions of dollars in annual cash flow from its rare disease segment for years to come.
Baidu
The fourth top growth stock you'll regret not buying after the Nasdaq bear market crash is none other than the China-based internet search giant. Baidu (BEGINNING -0.14%). Although China's slower-than-expected recovery from the pandemic has weighed on the country's largest companies, Baidu, like JD, is Ideally positioned to take advantage of long-term growth prospects. on a variety of channels.
Baidu's core operating segment is its Internet search engine., and that is unlikely to change. In December, Baidu accounted for 66.52% of all search share in China, according to GlobalStats data. With few exceptions, it has maintained a 60% to 85% share of Internet searches in the world's second-largest economy over the past nine years. As the undisputed leader in Internet search, Baidu should have no problem wielding reasonably strong advertising pricing power in most economic climates.
But there's more to like about Baidu than just its huge Internet search moat. Specifically, the company Blooming AI-Driven Segments Offer Huge Growth Potential.
Apollo Go is the world's leading autonomous transportation company by total trips since inception (4.1 million). Meanwhile, enterprise cloud spending is still in its early stages of expansion, which should drive revenue growth for Baidu's AI Cloud. AI has the potential to be a major cash flow driver for Baidu, but could require some patience as the technology matures.
The valuation also makes a lot of sense. Even taking into account the additional regulatory risks that come with investing in Chinese stocks, Baidu shares can be bought for less than 11 times next year's earnings. This is exceptionally economical for a company that has historically grown at a double-digit rate.
