All things considered, 2023 has been an incredibly strong year for equities. All three major stock indexes have notably rallied from their 2022 bear market lows, with the growth-focused Nasdaq Composite (^IXIC 0.55%) leading the charge (up 36% as of the closing bell on Nov. 29).
But even with this rally, the iconic Nasdaq Composite remains 11% below its record-closing high set two years earlier.
For short-term traders, a double-digit percentage decline over the span of two years will be viewed as a lost period for growth stocks. But for investors with a long-term mindset, a double-digit drop signals opportunity. After all, every double-digit decline throughout history (save for the 2022 bear market) has eventually been fully recouped by a bull market rally.
What follows are four preeminent growth stocks you’ll regret not buying in the wake of the Nasdaq bear market dip.
The first top-tier growth stock you can confidently purchase following the worst of the Nasdaq Composite’s bear market swoon is China-based electric vehicle (EV) maker Nio (NIO -1.65%). Despite near-term concerns about slower EV demand in the U.S. weighing on the industry (Nio isn’t currently selling EVs in the U.S.), Nio has an assortment of macro and company-specific factors working in its favor.
On a macro basis, the company is benefiting from the reopening of China’s economy following three years of stringent COVID-19-driven lockdowns. The supply chain issues caused by three years of lockdowns are beginning to dissipate, which should lead to a faster production ramp for Nio.
We’re already seeing evidence that pandemic-driven constraints are lifting. Nio averaged nearly 18,500 EV deliveries during the third quarter, with another 16,074 deliveries reported in October. Assuming China’s economy returns to something close to its pre-COVID annual growth rate, Nio could reasonably ramp up its output to an annual run rate of 600,000 within a year or two.
But what’s really exciting about Nio is the company’s innovation. It’s been introducing or updating at least one new EV a year, and it recently upgraded its EVs to the NT 2.0 platform. This new platform meaningfully improves advanced driver-assistance systems for Nio’s EVs, and it’s been a driving force (pun fully intended) in boosting sales for the company.
Nio has also been innovative beyond the driver’s seat. Its battery-as-a-service (BaaS) subscription offers EV buyers a way to quickly charge, swap, and upgrade their batteries. BaaS is a tool Nio is using to keep early buyers loyal to the brand.
Lastly, Nio is swimming with cash. Despite expected near-term losses, Nio closed out June with approximately $4.3 billion in cash, cash equivalents, and various short- and long-term investments. It has the capital, and access to additional funding, to successfully build from the ground up.
A second preeminent growth stock you’ll be kicking yourself for not scooping up during the Nasdaq bear market dip is cybersecurity company Okta (OKTA 9.81%). Although Okta is dealing with the near-term repercussions of a recent breach, the puzzle pieces are in place for this company to thrive over the long run.
The first factor working in Okta’s favor is that cybersecurity is effectively a necessity service. Hackers and robots don’t take time off from trying to steal sensitive information, which means businesses with an online or cloud-based presence need to protect this information at all times regardless of how well or poorly the economy is performing. Since Okta is a subscription-driven business, it means predictable operating cash flow in virtually any economic climate.
Okta is making a name for itself as a provider of identity verification services. Its platform is cloud-native, and incorporates artificial intelligence (AI) and machine learning. While clearly not perfect, as evidenced by the recent breach, AI-driven security solutions have the ability to learn and evolve over time. Being based in the cloud should allow Okta to more effectively and efficiently spot and respond to potential threats.
For the moment, Okta is just scratching the surface in identity verification. It’s on pace for $2.2 billion in full-year sales in fiscal 2024 (Okta’s fiscal year ends on Jan. 31), but it views identity verification as an $80 billion annual opportunity.
Perhaps the most exciting development is Okta’s acquisition of Auth0. Though this buyout has resulted in higher-than-anticipated integration costs, Auth0 is specifically geared to help Okta further penetrate the $30 billion Customer Identity market. Furthermore, Auth0 is opening doors for Okta to expand into international markets, which is key to sustaining its double-digit growth rate throughout the decade.
The third magnificent growth stock you’ll regret not adding to your portfolio during the Nasdaq bear market decline is specialty biotech company BioMarin Pharmaceutical (BMRN 1.47%). Though BioMarin is pricey relative to its current sales and cash flow, its unique operating model, along with the expansion of key therapeutics, make it a no-brainer buy for long-term-minded investors.
To keep with the theme of this list, there are macrofactors at play that help BioMarin generate consistent operating cash flow in virtually any economic environment. Since we don’t have the luxury of choosing when we get sick or what ailment(s) we develop, demand for prescription drugs, devices, and healthcare services is relatively constant. In other words, people taking drugs developed by BioMarin are going to need those therapies regardless of whether the U.S. economy is expanding or contracting.
Something else working in BioMarin’s favor is its focus on ultrarare diseases. While there are certainly risks associated with targeting very small pools of patients, there are rewards, too. In addition to improving the lives of patients with a previously untreated illness, BioMarin faces little or no competition and virtually no pushback from insurers on its list prices. In short, it’s raking in very high margins on approved therapies.
Dwarfism drug Voxzogo should continue to do most of the heavy lifting for the company, with recently approved severe hemophilia A drug Roctavian also lending a hand. Label expansion opportunities and exceptional pricing power give Voxzogo the potential to eventually top $1 billion in peak annual sales.
Between 2022 and 2026, Wall Street’s consensus is for BioMarin to more than quintuple its earnings per share (EPS). Given the predictability of the company’s sales and cash flow, along with its expansive pipeline, it has all the hallmarks of a bargain in the biotech industry.
A fourth preeminent growth stock you’ll regret not buying in the wake of the Nasdaq bear market dip is China-based internet search giant Baidu (BIDU -1.59%). That’s right, I’m ending this list the same way it began — with a China stock.
Like Nio, Baidu is going to benefit from the steady ramping up of China’s economy. While this return to normal won’t be without its speed bumps, there’s no reason to believe China’s long-term growth rate won’t outpace other developed countries.
What makes Baidu such an amazing company to buy and hold is its cash-cow internet search segment. According to data from GlobalStats, Baidu accounted for just shy of 70% of China’s search engine market share in October. This has been a pretty consistent theme for much of the past nine years. With few exceptions, it’s accounted for between 60% and 85% of China’s monthly internet search share, which makes Baidu the undisputed top choice for advertisers trying to target consumers in the world’s No. 2 economy by gross domestic product.
But there’s more for investors to latch onto than just Baidu’s leading search engine. In particular, Baidu has a burgeoning cloud-services segment, and it’s become a major AI player in China. Apollo Go is one of the world’s leading autonomous ride-hailing services, while Baidu’s AI Cloud has pretty consistently delivered double-digit sales growth for the company’s non-online marketing segment.
Baidu’s operating cash flow should give investors a reason to smile as well. In February, the company announced an up-to-$5 billion share-repurchase program, with $351 million in reported buybacks completed through the first nine months of the current year. Buybacks can reduce the number of shares outstanding and lift EPS, which makes already cheap stocks like Baidu (11 times forward-year earnings) that much more fundamentally attractive.