Short-term unpredictability has been the key word on Wall Street since the beginning of this decade. In the first four years of the decade, all three major stock indexes fluctuated between bear and bull markets in successive years, with no index experiencing bigger swings than the innovation-driven stock indexes. Nasdaq Composite (NASDAQINDEX: ^IXIC).
During the 2022 bear market, the Nasdaq lost a third of its value. But since the green flag waved in 2023, the Nasdaq Composite has risen 61% and hit multiple all-time highs. There is absolutely no doubt that this growth-oriented index is clearly in a bull market, even though it is still quite young.
While some investors may be hesitant to put their money to work on Wall Street with the Nasdaq Composite at an all-time high, history shows that every stock market correction and bear market throughout history in the major indices has ultimately been wiped out by a bull market. market rally. This means that any time can be a good time to put your money to work on Wall Street as you are a long-term investor.
Further value can can be found – even among growth stocks. Investors simply have to be willing to look for these hidden treasures.
What follows are four unparalleled growth stocks you’ll regret not buying in the new Nasdaq bull market.
Amazon
The first exceptional growth stocks that investors can add to their portfolios with confidence, even as the Nasdaq reaches new highs, e-commerce leader Amazon (NASDAQ: AMZN). Despite select predictive indicators and money-based numbers pointing to an increased risk of a recession in the US, Amazon’s key operating segments are perfectly positioned to thrive.
While Amazon is best known for its online marketplace, which is estimated to generate 37.6% of U.S. online retail sales in 2023, the company generates the majority of its operating cash flow and revenue from segments that aren’t necessarily consumer-facing.
Nothing is more important to Amazon’s future than the continued growth of Amazon Web Services (AWS), the world’s best cloud infrastructure services platform, with an estimated 31% share by the end of 2023, per technology analytics firm Canalys.
Although AWS recently surpassed $100 billion in annual run-rate sales, enterprise cloud spending is still in the early stages of projected growth. AWS regularly drives 50% to 100% of Amazon’s revenue and is the segment driving cash flow growth.
Advertising and subscription services are also critical to Amazon. Advertising has not grown by less than 20% annually in more than two years. Meanwhile, the company has strong pricing for Prime subscriptions. In exchange for simple benefits like free two-day shipping on most items in its online marketplace, it encourages more than 200 million subscribers worldwide to stay within its ecosystem of products and services.
Amazon also remains historically cheap. Shares can now be purchased for about 12 times consensus 2025 cash flow. That’s a marked discount from the multiple of 23 to 37 times year-end cash flow that investors were willing to pay to buy shares in the 2010s.
DocuSign
A second peerless growth stock you’ll regret not buying with the Nasdaq in a young bull market is an electronic signature company DocuSign (NASDAQ: DOCU).
In recent months, there has been speculation that DocuSign could be acquired and taken private. But CEO Allan Thygesen said in an interview with CNBC last week that his company plans to remain public. While short-term traders who were anticipating a buyout might not like these comments, long-term investors should rejoice.
One reason to be happy that DocuSign remains public is the moat in electronic signatures. According to Datanyze, DocuSign accounts for more than 67% of the electronic signature market. Although e-signature growth has slowed somewhat after the worst of the pandemic and with interest rates rising (i.e. fewer loans and mortgages being originated), a double-digit growth trajectory is likely in the long term for global e-signatures. -signature. software market.
Another reason to trust DocuSign is the company’s balance sheet. During the quarter ended January (DocuSign’s fiscal year ends January 31), it repaid all of its outstanding convertible debt. The roughly $1.2 billion in cash, cash equivalents and limited cash and investments the company had at its disposal to start fiscal 2025 gives it the flexibility to innovate internally and also grow inorganically.
For example, just three weeks ago the company announced a $165 million all-cash acquisition of Lexion, an agreement management software company powered by artificial intelligence. Including agreement management into the suite of existing services has the potential to increase DocuSign’s growth and expand its sales channels.
And the price-to-earnings (P/E) ratio of 16 is a bargain for a growth stock with a well-defined moat.
Green Thumb Industries
A third peerless growth stock that you’ll be kidding yourself if you don’t buy during the new Nasdaq bull market is cannabis multi-state operator (MSO). Green Thumb Industries (OTC: GTBIF).
The big buzz around marijuana stocks is that a long-awaited rebalancing of cannabis stocks appears to be (finally) upon us. Last week, the US Drug Enforcement Administration released its formal proposal to evolve cannabis from a Schedule I controlled substance to a less stringent Schedule III controlled substance.
While moving cannabis to Schedule III does not legalize it for recreational purposes, it would no longer subject cannabis-related businesses, including MSOs, to Section 280E of the U.S. Internal Revenue Code. Section 280E only allows businesses that deal in Schedule I and II controlled substances to deduct the cost of goods sold. If and when this move is made official, MSOs like Green Thumb will owe far less federal taxes, which should translate into faster earnings growth.
What sets Green Thumb apart from a sea of ​​other MSOs is its product mix. During the first quarter, it generated 57% of its revenue from derivatives, including vapes, edibles, pre-rolls, concentrates, beverages and health and beauty products. Derivatives have higher prices and substantially better margins than traditional dried cannabis flowers. This product mix has played a key role in making Green Thumb profitable.
Green Thumb Industries also has a presence in many of the top-selling cannabis states, including California, Florida and Illinois. It has 93 operating pharmacies in 14 states, and its back pocket is full of retail licenses that can be used to further expand its pharmacy footprint in key markets.
Visa
A fourth peerless growth stock you’ll regret not buying in the new Nasdaq bull market is the payment processor Visa (NYSE:V). While it’s subject to the same cyclical headwinds that make some investors skeptical of Amazon, Visa’s clear competitive advantages make it a surefire buy for those with a long investment horizon.
Visa, for example, benefits from disproportionately long periods of economic growth. Although recessions are a normal and inevitable part of the economic cycle, they are usually short-lived. By comparison, most economic expansions last several years. For Visa, this means longer periods during which consumers and businesses increase their spending.
To further reinforce this point, Visa’s management team has purposely avoided becoming a lender. Because the company focuses entirely on facilitating transactions, the company does not have to worry about possible credit delinquencies and credit losses as the economic downturn takes shape. It is a major advantage in the financial industry that you do not have to set aside capital to cover these potential losses.
Like the other companies on this list, Visa’s growth trajectory extends years into the future, if not decades. In addition to being the largest player in the US by credit card network purchasing volume, it has the opportunity to expand its payments infrastructure into chronically underserved regions of the world, such as the Middle East, Africa and Southeast Asia. Cross-border volume rose 16% in the quarter ending March.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Amazon and Visa. The Motley Fool holds positions in and recommends Amazon, DocuSign, Green Thumb Industries, and Visa. The Motley Fool has a disclosure policy.
4 Unparalleled Growth Stocks You’ll Regret Not Buying in the New Nasdaq Bull Market was originally published by The Motley Fool
