Putting your money to work on Wall Street requires patience and perspective. Since this decade began, all three major stock indexes have vacillated between bear and bull markets in successive years, with these swings most pronounced in the growth stock-powered Nasdaq Composite (^IXIC).
During the 2022 bear market, the Nasdaq Composite brought up the caboose with a 33% loss. But since closing this chapter, the Nasdaq has gained 51% and, as recently as last month, pushed to a new record-closing high above 16,400. This move confirms that the Nasdaq is firmly in a new, albeit young, bull market.
What’s particularly interesting about this leading index is that it’s retraced nearly 4% off its all-time high, as of the closing bell on May 2. For long-term-minded investors with cash at the ready, it means growth stocks can still be found at a bargain.
What follows are four colossal growth stocks you’ll regret not buying in the new Nasdaq bull market.
Mastercard
The first sensational growth stock that’s begging to be bought in the early stages of the new Nasdaq bull market is payment-processing leader Mastercard (MA).
The only real knock against Mastercard is that it’s a cyclical company. If the U.S. and global economy were to dip into a recession, consumer and enterprise spending would be expected to decline, which would have a negative effect on the fees Mastercard collects from merchants to process transactions. A couple of predictive indicators, including a historic decline in M2 money supply, suggest a growing likelihood of weakness to come in the U.S. economy.
On the other hand, history is very much on Mastercard’s side. Whereas most periods of economic expansion last for years, there hasn’t been a single U.S. recession since the end of World War II that endured longer than 18 months. Extended periods of growth allow Mastercard to consistently grow its sales by double digits year after year.
Though it’s a bit of a subtle point, Mastercard’s purposeful avoidance of lending is another reason for its ongoing success and sustained profit margin of more than 40%. Companies that lend have to set aside capital to cover possible credit delinquencies and loan losses that arise during recessions. Strictly focusing on payment processing means Mastercard avoids these pitfalls and bounces back from downturns faster than most lending institutions.
Additionally, Mastercard’s growth runway stretches for decades. Cross-border volume growth of 18% in the March-ended quarter speaks to just how large the opportunity is for it to continue expanding its payment infrastructure into underbanked regions, such as Africa, the Middle East, and Southeastern Asia.
While Mastercard might look a bit pricey at nearly 27 times forward-year earnings, this represents a 21% discount to its average trailing-five-year forward-earnings multiple.
Newmont
A second colossal growth stock that you’ll be kicking yourself for not buying in the early stages of the new Nasdaq bull market is gold-mining company Newmont (NEM). Yes, you read that right… a gold stock that’s also a growth stock.
Before (pardon the necessary pun) digging into company specifics, it’s important to recognize the elephant in the room: The spot price of gold has surged to an all-time high in 2024.
The sizable rally in physical gold can be explained by a stubbornly high prevailing rate of inflation. In other words, people are looking for a place to park their cash (rather than letting it sit under the proverbial mattress) where it won’t lose value over time. For decades, gold has been an asset that skittish investors have flocked to during periods of high inflation and/or economic turbulence. If the spot price of gold remains near an all-time high, it should translate into higher profitability for gold miners across the board.
One of the clearest company-specific catalysts for Newmont is its $16.8 billion, all-share buyout of Australia’s Newcrest Mining, which closed in November. Newmont anticipates recognizing $500 million in cost synergies by the end of this year, as well as beefing up the combined company’s operating cash flow by $2 billion within two years of closing. Buying Newcrest further solidified Newmont’s already impressive gold and copper reserve profile.
To add to the above, Newmont’s size presents clear cost advantages. Newmont has 10 “Tier 1 assets,” which are mines producing at least 500,000 gold equivalent ounces per year, with an all-in sustaining cost in the lower half of the industry, and a mine life of greater than 10 years.
Newmont’s earnings per share (EPS) is forecast to double between 2023 and 2027 to around $3.20, which makes this lustrous stock all the more delectable for growth seekers.
Baidu
The third exhilarating growth stock you’ll regret not adding to your portfolio with the Nasdaq firmly in a new bull market is China-based Baidu (BIDU).
The reason Baidu’s stock has struggled recently is because the Chinese economy hasn’t bounced back from the COVID-19 pandemic as quickly as expected. Multiple years of stringent lockdowns created supply chain kinks that are still working themselves out.
But as I pointed out earlier, patience and perspective are important when investing on Wall Street. Although China’s economic ramp-up is taking a bit longer than anticipated, its burgeoning middle class gives the world’s No. 2 economy by gross domestic product a path to sustained annual growth of 5% (or higher). Most large China-based companies, including Baidu, are going to benefit from this extensive growth runway.
Baidu’s foundational operating segment is its internet search engine. Baidu’s internet search share in China clocked in at close to 52% in April 2024, and has consistently come in at between 50% and 85% dating back 10 years, based on data from GlobalStats. Businesses are well aware that the best way to reach Chinese consumers is to target their advertising on Baidu’s search engine. When China’s economy finds its stride, once again, Baidu’s ad revenue should increase substantially.
However, Baidu’s most exciting growth catalyst is artificial intelligence (AI). Enterprise cloud spending is still in its infancy in China, which bodes well for Baidu’s AI Cloud platform. Meanwhile, subsidiary Apollo Go surpassed more than 5 million cumulative autonomous rides since its inception. Perhaps it’s no surprise that Baidu is providing electric vehicle maker Tesla with its mapping license for data collection on Chinese roads.
Baidu is forecast to grow its EPS by roughly 12% through 2027, but is currently valued at less than 10 times forward-year EPS. That’s what we call a growth stock bargain!
NextEra Energy
A fourth colossal growth stock you’ll regret not buying in the new Nasdaq bull market is the U.S.’s largest electric utility by market cap, NextEra Energy (NEE).
Generally, utility stocks are slow-growing businesses that investors seek out for their low volatility and market-topping income. NextEra has been consistently doubling or tripling the growth rate of other electric utilities for more than a decade, which qualifies it as a growth stock in an industry where very few exist.
The not-so-subtle secret to NextEra’s long-term outperformance has been its focus on renewable energy. Out of its 72 gigawatts (GW) of capacity, 36 GW can be traced to green energy sources, including 24 GW of wind and 7 GW of solar. No utility in the world has more wind or solar capacity than NextEra Energy.
Though investing in cleaner energy solutions has been pricey, it’s paid off in a big way for NextEra. Adjusted earnings have averaged a 10% growth rate since 2013, with dividend growth coming in at a compound annual rate of 11% over the same span. Substantially lower electricity generation costs have bolstered the company’s profit and payout growth rates, compared to its peers.
What’s more, NextEra Energy has no intentions of paring back its clean energy investments. Even with the Federal Reserve undertaking its steepest rate-hiking cycle in four decades, NextEra plans to bring between 32.7 GW and 41.8 GW in collective clean energy projects online between the start of 2023 and end of 2026. This should help it sustain a superior growth rate within the utility sector.
Shares of NextEra Energy can be snatched up right now by opportunistic growth seekers for less than 19 times consensus EPS forecasts for 2025. That’s a 27% discount to its average forward-year earnings multiple over the last five years.
— Sean Williams
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