Unless you're a short-seller or were heavily weighted to energy stocks, 2022 was a difficult year on Wall Street. All three of the major U.S. stock indexes dipped into a bear market and produced their worst returns since 2008.
But it was the growth-centric Nasdaq Composite (^IXIC -1.79%) that took the brunt of the beating. When the curtains closed last year, the index responsible for leading the broader market to new highs in 2021 had lost 33% of its value. Rapidly rising interest rates and the fear of a recession decimated many previously high-flying stocks.
Image source: Getty Images.
If there's a silver lining to this turmoil, it's that every bear market throughout history has eventually given way to a bull-market rally that led Wall Street higher than ever before. In other words, bear markets represent ideal opportunities for patient investors to do some shopping.
Considering how badly growth stocks have been thrashed, this bear market could be an especially wise time to nab game-changing stocks at a discount. What follows are five special growth stocks you'll regret not buying during the Nasdaq bear market dip.
Teladoc Health
The first distinctive growth stock that's ripe for the picking as the Nasdaq falters is telemedicine kingpin Teladoc Health (TDOC -4.64%). Although the company grossly overpaid for applied health signals company Livongo Health in 2020 -- and subsequently took huge writedowns on this deal in 2022 -- Teladoc's growth trajectory remains intact as it completely reshapes personalized care in the U.S.
A lot of skeptics consider Teladoc to be nothing more than a COVID-19 pandemic-fad stock. Although the company did enjoy a surge in virtual visits during the pandemic, it had already been growing sales by an annual average of 74% between 2013 and 2019. Even with the worst of the pandemic likely over, Teladoc expects sustained double-digit growth for at least the next five years, if not beyond.
The beauty of telehealth services is that they can benefit all facets of the healthcare treatment chain. Though virtual visits aren't appropriate for all physician-patient interactions, they're considerably more convenient for patients. They also allow physicians to keep closer tabs on patients with chronic illnesses that need more monitoring. The point here is that telemedicine services should improve patient outcomes and, ultimately, lower out of pocket expenses for health insurers.
With the writedowns tied to the Livongo deal now in the rearview mirror, Teladoc's 2023 income statement will be a lot cleaner. If the company can maintain double-digit growth, increase its chronic-care subscribership via Livongo, and take steps to reduce its expenses, Teladoc should be set for a nice rebound.
Intuitive Surgical
The next unique growth stock you'll regret not buying during the Nasdaq bear market plunge is robotic-assisted surgical system developer Intuitive Surgical (ISRG -1.93%). Although the COVID-19 pandemic has delayed some procedures and slowed Intuitive's growth rate a bit in the short run, the company's clear-cut competitive advantages make it a screaming buy.
When 2022 came to a close, Intuitive Surgical had 7,544 of its da Vinci surgical systems installed worldwide. This might not sound like a large number, but it's far more than any of its competitors.
To build on this point, the company's da Vinci surgical systems typically cost between $0.5 million and $2.5 million. The sizable nominal-dollar investment for these systems, coupled with the time it takes to train surgeons to use da Vinci, makes it extremely unlikely that buyers are going to switch to a competing surgical system. In short, Intuitive Surgical can count on predictable cash flow year in and year out.
But the best thing about this company might just be its razor-and-blades operating model. The "razor" is the company's da Vinci surgical system, which is pricey but doesn't generate the best margins. Getting hospitals and surgical centers to buy this razor means they'll come back for the high-margin "blades," such as instruments sold with each procedure and servicing on da Vinci systems. Intuitive Surgical's earnings growth can outpace sales growth as these blades grow into a larger percentage of total revenue.
Image source: Pinterest.
A third special growth stock you'll regret not scooping up during the Nasdaq bear market downturn is social media company Pinterest (PINS -2.86%). Though near-term ad-spending concerns have weighed on the stock, Pinterest has demonstrated it has the tools and intangibles to head much higher.
A lot has been made of Pinterest's monthly active user (MAU) decline/flattened growth since March 2021. However, this overlooks the abnormally large MAU surge the company experienced during the early stages of the pandemic when people were stuck in their homes. If you examine MAU growth over a longer stretch, such as five years, you'll see a fairly steady upward trend.
What's more important than aggregate user growth is that Pinterest is successfully monetizing the 445 million MAUs it does have. Even with ad-driven companies sounding the warning of slower growth throughout 2022, Pinterest delivered an 11% global increase in average revenue per user (ARPU) in the quarter that ended in September. Sustained double-digit ARPU growth is a clear sign that advertisers are willing to pay a premium to reach Pinterest's large army of potential shoppers.
Lastly, investors need to realize that data-tracking changes implemented by app developers aren't much of a headwind for Pinterest. Since its entire platform is based on MAUs willingly sharing the things, places, and services they like, merchants can use this data to target users. It sets Pinterest up to become a key e-commerce player in the years to come.
Fiverr International
The fourth one-of-a-kind growth stock you'll regret not picking up during the Nasdaq bear market drop is online-services marketplace Fiverr International (FVRR 0.25%). In spite of the growing likelihood of a recession this year, Fiverr's truly unique platform can still outperform.
I have previously pounded the table on Fiverr, and three catalysts stand out. To start with, the labor market has undergone what looks like a permanent shift to a hybrid-work environment. Even though some people have returned to the office, the pandemic has ballooned the number of remote workers. That's great news for a freelancer-based platform like Fiverr.
Second, Fiverr's online marketplace presents freelancer tasks as a complete package. In other words, buyers know exactly how much they're paying for a service ahead of time. That compares to other freelancer websites on which pricing is often presented on an hourly basis. This cost transparency has helped push both the aggregate number of buyers on Fiverr and spending per buyer successively higher throughout 2022.
And third, Fiverr's take rate is likely tops among gig economy marketplaces. The "take rate" describes the percentage of each deal negotiated on its platform it gets to keep. Fiverr's take has steadily climbed and hit 30% on the nose in the third quarter. This means Fiverr is keeping a greater percentage of each deal, yet it's still attracting new freelancers and buyers. That's a winning formula if I've ever seen one.
Upstart Holdings
A fifth special growth stock you'll regret not buying on the Nasdaq bear market dip is cloud-based lending platform Upstart Holdings (UPST -7.89%). Even though rapidly rising interest rates are doing Upstart no favors, the company's lending solutions have an opportunity to completely transform an industry in dire need of disruption.
The traditional loan-vetting process tends to be costly and time-consuming. Upstart's loan platform relies on artificial intelligence (AI) and machine-learning capabilities to quickly vet loan applications. The quarter ended in September saw 75% of all loan applications approved and fully automated. This puts money into the hands of applicants faster than ever and significantly reduces costs for Upstart's 83 bank/credit union partners.
But what's arguably been most intriguing about Upstart's AI-driven lending platform is that it's approving a wider swath of the population for personal loans. Despite Upstart approvals having a lower average credit score than people vetted with the traditional process, the company notes that delinquency rates have been similar between the two processes.
If Upstart can maintain this similarity in both favorable and unfavorable market conditions, it can substantially broaden the lending pool for financial institutions without worsening their credit-risk profiles.
It's also worth noting that Upstart is very early in its growth cycle. The personal loans it's focused on account for $146 billion of the $5 trillion annual loan-origination market. Last year, Upstart began pushing into auto loans, which account for $786 billion in annual loan originations. If the Fed takes its foot off the accelerator in the coming months and slows its pace of interest rate hikes, Upstart could see a steady rebound in loan-processing demand.
