Regardless of whether you’re a new or veteran investor, this year has been challenging. Since hitting their all-time highs, the benchmark S&P 500iconic Dow Jones Industrial Averageand powered by technology Nasdaq Composite, are respectively lower by 14%, 11% and 24%. The more than 20% drop in the Nasdaq puts the index firmly in bear market territory.
And it’s not just the magnitude of the aggregate declines that worries investors. Last Thursday, May 5, we witnessed what can be accurately described as a stock market crash. The Nasdaq Composite posted its third-biggest point drop in a single session on record, at one point it was 6% lower on the day. Nominal point declines for the S&P 500 and the Dow were also among the 10 largest in history.
While stock market crashes and sharp corrections can be scary, history has also shown that they are the perfect time to go shopping. This is because every dip and correction throughout history has ultimately been erased by a bull market rally. If you buy and keep game-changing companies, you will have a high chance of increasing your wealth.
What follows are five pick-ripe discount growth stocks you’ll never have to sell.
The first is the social media giant Metaplatforms (FULL BOARD 0.73%), the company formerly known as Facebook. Based on its 14-year forward earnings multiple, Meta has never been cheaper.
Despite the fact that its stock has gone to waste since the beginning of the year, Meta closed March with 3,640 million monthly active users (MAU), 6% more than in the same quarter of the previous year. Put another way, more than half of the world’s adult population visits a Meta-owned asset (Facebook, Instagram, and WhatsApp) every month. Advertisers understand that there is no social media platform that offers access to a larger audience, which is why Meta generally possesses exceptional ad pricing power.
Another thing to consider about Meta is the company’s leadership position in metaverse investments. The metaverse is the next iteration of the Internet that will allow connected users to interact with each other and their environment in 3D virtual worlds. Although the expenses of the metaverse have weighed on Meta’s short-term profits, these investments should pay off if the metaverse realizes its multimillion-dollar potential.
Investors can also confidently buy shares in the developer of robotic surgical systems intuitive surgical (ISRG 1.28%) and never sell. The company’s shares have fallen nearly 39% in less than five months.
The beauty of the Intuitive Surgical operating model is twofold. For starters, the company has operated as the undisputed leader in soft tissue surgery for the past two decades. It had 6,920 of its da Vinci surgical systems installed worldwide, as of March 31, 2022, which is far more than its competition. Because these machines are expensive and surgeon training takes time, Intuitive Surgical tends to retain customers for a long time.
The other key to Intuitive Surgical’s success is that its operating margins are designed to grow over time. In the 2000s, most of the company’s revenue came from the sale of its da Vinci systems. Unfortunately, these are intricate systems, which means that the margins associated with their sale were lackluster at best. Over time, sales of instruments and accessories with each procedure, along with service revenues, have become the lion’s share of total sales. These are higher margin segments that set this company up to be a long-term winner.
Following a 72% drop, online specialty retailer Etsy (ETSY) -2.71%) check all the appropriate boxes as a discounted growth stock to buy now and keep forever. The shares are currently trading at 21 times Wall Street’s future earnings estimate, which is an all-time low for Etsy.
Like most online retailers, Etsy is grappling with supply chain issues and inflationary headwinds that are hampering its year-over-year comparisons. But unlike other online retailers, Etsy’s platform has a unique competitive advantage. While most retailers are impersonal and strive for volume, Etsy merchants are predominantly small businesses that thrive on customization and engagement. There is simply no other retail platform that can scale and engage with consumers like Etsy.
Additionally, Etsy has done an amazing job of converting occasional shoppers into “return shoppers,” a term the company uses to describe people who spend at least $200, in total, during the past 12-month period and make six or more purchases. Continuing to increase the number of repeat buyers is Etsy’s ticket to generating more revenue from merchants on its platform.
Another deeply discounted growth stock that is crying out to be bought during this stock market selloff is the biotech stock. Novavax (NVAX 1.13%). Shares of the company are more than 80% below their COVID-19 pandemic high despite an expected price-to-earnings ratio of less than 3 in 2022.
The biggest near-term driver for Novavax is NVX-CoV2373, the company’s COVID-19 vaccine. Two clinical trials for adults demonstrated respective vaccine efficacies of 89.7% and 90.4%. Earlier this year, it also produced an 80% vaccine efficacy in a trial for adolescents. The key point is that Novavax is one of a select few vaccine developers to reach the 90% efficacy mark in clinical trials, giving NVX-CoV2373 a real chance to become a key global player during the pandemic. .
Looking further, Novavax has the potential to be a leader in the development of combination vaccines. While the company is entering the COVID-19 vaccine arena after other Big Pharma players, it has an opportunity to be a leader in bringing a combined influenza and COVID-19 vaccine to market. With a proven development platform, Wall Street has only seen the tip of the iceberg when it comes to Novavax’s long-term potential.
Though it doesn’t scream “value” like Novavax, the payment processing kingpin Visa (V 0.30%) it’s another growth stock that hasn’t been this cheap in years, based on Wall Street’s forward earnings multiple. The stock is priced at about 24 times next year’s earnings for a company that is growing steadily by a double-digit percentage.
The best thing about Visa is its cyclical bonds. Some investors may not feel that way given the growing likelihood of a recession caused by historically high inflation and rising Federal Reserve rates. However, it is important to note that periods of economic expansion disproportionately last longer than recessions and contractions. For starters, Visa is perfectly positioned to benefit from high inflation, as consumers and businesses spend more for the same amount of goods and services.
Investors should also appreciate Visa’s focus on payment processing. Although Visa apparently has the option to become a lender and generate interest income, it chooses not to. Because the company does not make loans, it is not required to set aside capital for bad loans during recessions and economic downturns. This explains Visa’s over 50% profit margin and is why investors will never have to sell.