Putting your money to work on Wall Street is bound to come with its highs and lows. In successive years since the decade began, all three major stock indexes have traded off bear and bull markets, with the growth-stock-powered Nasdaq Composite (^IXIC -0.96%) vacillating the most.
During the 2022 bear market, the Nasdaq Composite brought up the caboose. It lost 33% of its value, which represented a notably worse performance than the Dow Jones Industrial Average and S&P 500. But since the start of 2023, the Nasdaq has been leading the charge. It's up more than 55% in a little over 14 months and recently took out its previous record high, which was set in November 2021.
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But don't think for a moment that, just because the Nasdaq Composite is breaking records, deals can't still be found. With the "Magnificent Seven" doing most of the heavy lifting, bargains among growth stocks can still be uncovered for opportunistic long-term investors.
What follows are four awe-inspiring growth stocks you'll regret not buying in the new Nasdaq bull market.
Visa
The first magnificent growth stock you'll be kicking yourself for not adding to your portfolio, even with the Nasdaq taking out new highs, is payment-processing company Visa (V -1.18%).
All companies face headwinds -- even industry leaders like Visa. The "enemy" of financial stocks is recessions. Financial companies are cyclical and usually rely on economic growth to expand their bottom lines. If select money-based metrics and predictive indicators are accurate, the U.S. economy could dip into a recession later this year, which would almost certainly curb spending and reduce the number of aggregate transactions by consumers and businesses.
However, it makes a lot of statistical sense to remain optimistic about the U.S. economy. Whereas three-quarters of all recessions since 1945 have resolved in under a year, the bulk of expansions over the same stretch have stuck around for multiple years, if not a full decade. Businesses like Visa are ideally positioned to take advantage of the natural expansion of the U.S. and global economy over time.
On a more company-specific level, Visa is the undisputed leader in credit card network purchase volume in the United States. It holds a nearly 42% share and was the only one of the major payment processors to enjoy significant share expansion following the Great Recession.
Furthermore, it has a lengthy runway to expand its payment infrastructure into overseas markets. Africa, Southeastern Asia, and the Middle East remain largely underbanked, and cross-border volume has been Visa's fastest source of consistent payment growth.
The final piece of the puzzle for Visa is that it's strictly remained a payment processor. During recessions, lending institutions have to set aside capital to cover loan delinquencies and potential loan losses. Since Visa doesn't lend, it has superior financial flexibility and few profit margin headwinds.
Lovesac
A second awe-inspiring growth stock you'll regret not scooping up with the Nasdaq in a relatively young bull market is furniture company Lovesac (LOVE 0.44%). Yes, I did just use "furniture company" and "growth stock" in the same sentence.
Generally speaking, the furniture industry is slow-growing, highly cyclical, and dependent on foot traffic into brick-and-mortar stores. It's an industry that's been ripe for disruption for a long time... and Lovesac has answered the call.
The most front-and-center differentiating factor for Lovesac is its furniture. Nearly 90% of the company's net sales trace back to its "sactionals" -- modular couches that can be rearranged dozens of ways to fit most living spaces. The yarn used in sactionals is made from recycled plastic water bottles, which speaks to the eco-friendliness of the product. Meanwhile, sactionals have more than 200 different cover choices, which ensures they'll match the color or theme of any room.
In addition to functionality, optionality, and eco-friendliness, Lovesac's price points provide a competitive edge. With the ability to add wireless charging and surround sound, sactionals tend to be pricier than traditional sectional couches. But this is precisely what management wants. Lovesac's targeted customer tends to have a higher income, and is therefore less likely to alter their spending habits during periods of minor economic disruption.
Lovesac's omnichannel sales platform is another reason for its success. Though it does have physical stores in 40 states, the company leans on its online presence, popup showrooms, and select brand-name partnerships to keep its inventory levels under control and lower its overhead expenses. The result has been superior margins among furniture stocks.
Lovesac looks to be a steal at 10 times forward-year earnings.
Image source: Getty Images.
Intel
The third striking growth stock you'll wish you'd purchased during the early stages of the Nasdaq bull market is semiconductor stock Intel (INTC -0.26%).
If there's a knock against Intel, it's the company's historic reliance on legacy central processing units (CPUs). With seemingly every investor focused on artificial intelligence (AI) at the moment, the slower growth rates and highly cyclical sales trajectory of CPUs in personal computers (PCs) has dragged on the performance of Intel's stock.
On the other hand, Intel's legacy segments are still cash cows. Even after losing some of its CPU market share in data centers and PCs to chief rival Advanced Micro Devices, Intel remains the dominant provider of CPUs for PCs. The cash Intel generates from these segments can be reinvested in higher-growth initiatives for the company.
One of these intriguing opportunities happens to be in AI. Intel unveiled its Gaudi3 AI chip in December, with the goal of rolling it out to customers in 2024. Gaudi3 will compete with Nvidia's flagship H100 graphics processing unit (GPU), which is used in AI-accelerated data centers to power generative AI software.
Intel is also diversifying its revenue stream by meaningfully expanding its foundry services segment. It plans to open two chip fabrication plants in Ohio by 2026 or 2027, as well as one in Germany in the latter half of the decade. By 2030, Intel could grow into the world's No. 2 foundry.
Despite being a stalwart among chipmakers, Intel is most definitely a growth stock. Between 2023 and 2027, earnings per share is expected to catapult from a reported $1.05 to an estimated $4.44.
Meta Platforms
A fourth awe-inspiring growth stock you'll regret not buying in the new Nasdaq bull market is none other than social media titan Meta Platforms (META -1.57%).
Similar to Visa, recessions tend to be Meta's biggest concern. Last year, nearly 98% of its $134.9 billion in total sales could be traced back to advertising. It's common for businesses to reduce their ad spending when the U.S. economy weakens or offers hints of weakness to come. Thankfully, periods of economic expansion last substantially longer than recessions, which allows ad-driven businesses to thrive.
Meta's foundational operating segment is its basket of leading social media sites. Facebook is the world's most visited social destination, with 3.07 billion monthly active users (MAUs). Adding in other highly popular sites, including WhatsApp, Instagram, and Threads, Meta's family of apps attracted just shy of 4 billion MAUs during the December-ended quarter. Since Meta provides businesses with access to more eyeballs than any other social platform, it's often able to command strong ad-pricing power.
Another reason investors can be confident about Meta Platforms' future is its superior cash position and cash flow. The company closed out 2023 with $65.4 billion in cash, cash equivalents, and marketable securities, which comes atop the $71.1 billion generated in net cash from operating activities for the year. Meta's cash-cow advertising platform allows the company to take risks that few other companies can afford to.
One of the growth initiatives CEO Mark Zuckerberg is especially excited about is the development of augmented/virtual reality devices, as well as supporting almost anything to do with the metaverse. Though Meta's Reality Labs segment is losing money hand over fist, Zuckerberg is positioning his company to be an on ramp to 3D virtual environments by the latter half of the decade.
Last but not least, Meta Platforms is still cheap. Despite more than quintupling from its 2022 bear market low, shares can be purchased for less than 14 times forward-year cash flow, which represents a modest discount from the company's average multiple to cash flow over the trailing-five-year period.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sean Williams has positions in Intel, Lovesac, Meta Platforms, and Visa. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Nvidia, and Visa. The Motley Fool recommends Intel and Lovesac and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
