Nasdaq bear market: 3 growth stocks you’ll regret not buying at knockdown prices
No one likes to hear about their portfolio value slipping in the wrong direction. That said, the best investors in the world know that bear markets are the best times to be a net buyer of stocks.
Fear of rising interest rates and the resulting recession has pushed Nasdaq Compound index, which is full of growth stocksabout 30.6% lower since the end of 2021. At times like these, investors terrified of what might happen in the near term are dumping their stocks and driving prices lower than they probably should be.
Sophisticated long-term investors who understand that it’s only a matter of time before the market rallies have scooped up shares of these recently discounted growth stocks. Here’s why.
Focus on video communications
Shares of Focus on video communications (ZM -0.46%) seemed unstoppable at the start of the COVID-19 pandemic. Unfortunately, the stock has more than halved this year thanks to the reopening and a general distaste for growth stocks caused by rising interest rates.
Zoom is growing rapidly, but it’s not a long-term tech company that burns through the cash reserves provided by its investors. In fact, the operation of the business is already profitable with profits under according to generally accepted accounting principles (GAAP) which accounted for 4% of revenue during the company’s second fiscal quarter ended July 31.
Zoom launched a unified communications service called Zoom Phone in 2019 and it is rapidly gaining popularity with large enterprises. The number of customers with at least 10,000 paid seats more than doubled year-on-year during the second fiscal quarter. A pair of particularly large customers pushed the total number of payphones to more than 4 million in August. With ample room for growth and enterprise-level subscriptions providing relatively stable cash flow, this stock looks like a long-term investor’s dream come true.
medical shock wave
medical shock wave (SWAV 0.66%) defies the trend with a price that has increased by 55% this year. Shockwave manufactures the world’s only intravascular lithotripsy (IVL) devices for the treatment of peripheral arterial and coronary artery disease. The stock is up in a tough year for growth stocks as the company’s devices set a new standard of care for treating hardened arteries.
Shockwave medical devices are essentially narrow catheters that slide through clogged arteries and deliver powerful sonic pressure waves to break up calcified plaques. This stock is a great stock to buy now and hold for the long term because IVL is more than just a concept. VILI is clinically proven to be more predictable than the current standard method for treating hardened arteries.
In the absence of Shockwave’s IVL devices, surgeons rely on angioplasty, which involves small balloons that stretch an artery from the inside out to break up calcium deposits. In the Disrupt trial, patients with peripheral arterial disease were 77% less likely to suffer from a split artery when treated with IVL compared to angioplasty.
Shares of Duolingo (DOUOL -6.54%) soared at the start of the pandemic, along with demand for its language-learning services. Unfortunately, the bearish trend in growth stocks across the board has seen the stock fall about 59% from its 2021 peak.
Duolingo offers the most profitable educational application on AlphabetGoogle Play Store and Applethe app store. By the end of the second quarter of this year, it had 3.3 million paying subscribers, up 71% from a year earlier.
Many Duolingo subscribers are native English speakers, but it’s the much larger population of non-English speakers that makes this stock a solid buy right now. The company markets an English proficiency test that is increasingly accepted by Western universities and employers. Second-quarter revenue for the Duolingo English test soared 66% year-over-year to $8 million this year and a strong acceptance rate means it could continue to climb.
Duolingo’s English Proficiency Test is already accepted by the top 25 US universities by enrollment. Instead of seeing the app as a threat, educators regularly encourage students to use it to supplement their lessons. With institutions as eager to get on board as individuals, the next chapters in this company’s growth story could be the most exciting yet.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Cory Renauer holds positions at Duolingo, Inc. and ShockWave Medical. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Apple, ShockWave Medical and Zoom Video Communications. The Motley Fool recommends the following options: long calls $120 in March 2023 on Apple and short calls $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.
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