Nasdaq bear market: 5 magnificent growth stocks you’ll regret not buying on the downside

For most investors, 2022 has not gone as planned. After a year in which the biggest circulation of the S&P500 only totaled 5%, the benchmark reacted in 2022 by plunging into a bear market and delivering its worst first-half performance in 52 years.

But that’s nothing compared to dependent growth stock Nasdaq Compound (^IXIC 2.87%), which has fallen 38% peak-to-peak since hitting an all-time high last November. The index most responsible for pushing the broader market to new highs is now its biggest drag.

Although bear markets are notorious for playing on investors’ emotions and forcing them into rash decisions, they are also often short-lived and a great time to put money to work. Eventually, each bear market dip was fully recovered by a bull market rally.

This bear market seems like a particularly good time for opportunistic investors to pick up battered growth stocks. Below are five gorgeous growth stocks you’ll regret not buying during the Nasdaq bear market decline.

Baidu

The first notable growth stock you’ll blame yourself for not adding to the Nasdaq bear market decline is the China-based internet content giant Baidu (BIDU -2.98%). Although near-term fears over President Xi Jinping’s cabinet reshuffle in China are sure to cause high volatility in Chinese stocks, Baidu’s foundations are solid and its ancillary operating segments are growing rapidly.

This “foundation” of which I speak includes the company’s internet search engine. In June 2022, Baidu accounted for more than 75% of all page views in China, according to data provided by Statista. With a virtually insurmountable market share in internet search in the world’s second largest economy, it only makes sense that advertisers pay a premium to get their message in front of consumers.

While Internet search serves as a cash cow, cloud computing and artificial intelligence (IA) offer supercharged long-term growth potential. In a second quarter that saw China’s economy challenged by the country’s zero COVID strategy, Baidu managed to generate 31% year-over-year growth in AI Cloud revenue . It also retained its leadership role as a standalone transportation service provider through Apollo Go.

Patient growth seekers can pick up shares of Baidu right now for less than 9 times Wall Street’s projected earnings for 2023. That’s quite a bargain for a company with a long track record of double-digit percentage growth.

Fiver International

A second fantastic growth stock just begging to be bought as the Nasdaq falls is the online services market. Fiver International (FVRR 2.54%). Despite fears of rising unemployment weighing on near-term sentiment, Fiverr appears well-positioned to benefit from long-running economic expansions.

Like other online service platforms, Fiverr offers a way for freelancers to sell their business services. However, a key difference for Fiverr’s marketplace is how these services are presented. While major competitors’ freelancers charge an hourly rate, Fiverr’s assignments are presented as a flat rate. This creates unparalleled pricing transparency, which businesses seem to appreciate. Even though the US economy has weakened in the first half of 2022, spending per buyer on Fiverr’s platform has increased.

What’s even more important to Fiverr is the company’s higher participation rate – that is to say the percentage of income that it obtains to keep the transactions concluded on its market. While some of its peers are garnering low to mid-teens turnout, Fiverr’s turnout has grown to 29.8% in the quarter ending June. Retaining a higher percentage of a growing number of deals made in its market is a recipe for profit growth.

With a sustained double-digit growth rate and a forward price-to-earnings ratio of just 26, Fiverr looks like an amazing deal.

Image source: Getty Images.

Exelixis

Biotech Action Exelixis (EXEL 1.90%) is a third gorgeous growth stock you’ll regret not buying during the Nasdaq bear market decline. Even though poor investment sentiment has weighed on drug stocks throughout 2022, Exelixis has the competitive advantages needed to offer its shareholders.

For years, Cabometyx is what thrilled Exelixis. Cabometyx is approved by the United States Food and Drug Administration to treat first- and second-line renal cell carcinoma, as well as previously treated advanced liver cancer. These indications alone, coupled with strong pricing power and improved cancer screening diagnostics, have propelled the company’s flagship drug past $1 billion in annual sales.

But this may just be the start. Exelixis examines Cabometyx in dozens of clinical trials. Even if most of these attempts fail, the handful of successes that allow opportunities for label expansion could eventually push Cabometyx to more than $2 billion in annual sales.

Additionally, Exelixis has a large cash stack to draw on. The company ended the first half of 2022 with approximately $2 billion in cash, cash equivalents, restricted cash equivalents and investments. This is more than enough to conduct additional studies on Cabometyx, conduct internal research on new anticancer compounds, and collaborate with other drug developers.

Exelixis is a steal at a multiple of 14 times forecasted Wall Street earnings in 2023.

Innovative industrial properties

A fourth growth stock to beat the table on during the Nasdaq bear market decline is focused on cannabis real estate investment trust (REIT) Innovative industrial properties (IIPR 3.80%), or IIP for short. Dig below the surface with IIP, and you’ll see that Congress’ failure to pass marijuana reforms isn’t a big deal for this cannabis growth stock.

IIP is like a typical real estate REIT in that it wants to buy properties and lease them for an extended term. The only difference is that it’s buying medical marijuana cultivation and processing facilities, in states where medical weed is legal. In total, IIP owns 111 properties covering 8.7 million square feet of rental space in 19 states.

The best thing about REITs is that their operating models tend to be very predictable. Until the middle of the year, Innovative Industrial Properties had collected 99% of its rents on time. While acquisitions represent its primary source of sales and profit growth, IIP can also pass on inflationary rent increases each year that modestly move the needle.

Another interesting thing about innovative industrial properties is that the marijuana that remains federally illegal is actually portion the company generates new business. With access to financial services being unequal for multi-state operators (MSOs), IIP offered a solution with its sale-leaseback program. With this program, IIP acquires properties for cash and immediately rents them to the seller. It’s a win-win that provides MSOs with much-needed capital and IIP with a long-term tenant.

Innovative industrial properties look cheap at 15 times earnings in the coming year, while sporting a dividend yield of 7.5%.

JD.com

The fifth magnificent growth you will regret not buying during the Nasdaq bear market decline is e-commerce company JD.com (JD -4.15%). Like most Chinese stocks, JD was punished by fears of increased regulation. However, those fears might be overblown, at least as far as JD is concerned.

JD is right behind Ali Baba (BABA -3.19%) in the e-commerce space in China. Considering that Alibaba was hit with a record $2.8 billion antitrust fine by China in 2021, investors might be led to believe JD will find itself under the microscope next.

However, they are very different operating models. While Alibaba is mostly made up of third-party marketplaces, JD operates more like Amazon. It controls its inventory and logistics, while relying very little on third-party marketplaces. In my opinion, that’s a big difference, especially since this company will stay off the radar of Chinese regulators.

While online retail accounts for the bulk of JD’s revenue, it’s the company’s ancillary operations that could be even more exciting. This includes the company’s burgeoning logistics segment, as well as the majority investment in local on-demand delivery service Dada. These segments offer higher sustained growth potential and juicier margins than online retail sales.

With the potential for continued double-digit sales growth, JD appears to be historically cheap at 13 times Wall Street’s projected earnings for the coming year.