But it is by no means the worst performing index. The technology addict Nasdaq Composite (^IXIC) it has plunged a whopping 38% from peak to trough over the past year. The supercharged growth stocks that had driven the market to new highs are now being shunned by Wall Street and investors at all costs.
Yet herein lies the opportunity: Just as investors have a habit of overshooting valuations during bull markets, so does it when stocks look at their gloomiest. While sentiment may be thin now, long-term investors can score incredible deals during the Nasdaq bear market.
The following are three phenomenal bargains patient investors can buy right now that can double your money by 2027.
The first big deal that can potentially double your money in the next five years is the Chinese internet search giant, Baidu (BIDU 2.02%).
Baidu’s shares traded north of $320 in February 2021 but closed last week at $85. Everything from increased regulatory scrutiny in China to the country’s zero-COVID strategy, which has crippled chains sourcing in various provinces, weighed on Wall Street’s opinion of Baidu. Thankfully, this fear is your opportunity to pounce.
Baidu’s foundation is built on top of its Internet search segment, which is a real cash cow for the company. According to data from GlobalStats, Baidu accounted for 60% of China’s search engine market share in October 2022, or 44 percentage points above its closest competitor.
China is the world’s second largest economy by gross domestic product and has a thriving middle class. In other words, advertisers are incentivized to pay a premium on Baidu’s platform to get their message in front of these potential consumers.
Equally exciting is what Baidu is doing beyond its core operating segment. The company has invested heavily in cloud computing and artificial intelligence (AI). Even with economic growth in China challenged by the country’s zero-COVID strategy, AI Cloud revenue grew 31% during the quarter ended June.
In addition, Baidu’s Apollo Go is currently the world’s No. 1 autonomous transportation service. While these are smaller revenue segments right now, they are growing at a much faster rate than internet search.
Historically, Baidu is a company that has had little trouble maintaining a double-digit growth rate. While that may change in the near term, all signs continue to point to long-winded bull markets favoring its Marketing, Cloud, and AI operating segments. Valued at just 9 times Wall Street’s earnings forecast for the year ahead, Baidu looks like a killer deal.
A second phenomenal business capable of triple-digit returns by 2027 is the development of biotech stocks and COVID-19 vaccines Novavax (NVAX 0.65%).
Novavax makes Baidu’s 75% drop look like a walk in the park. During the COVID-19 pandemic, shares of Novavax changed hands for more than $300. The shares closed last week at $19. Novavax was eventually beaten to drugstore shelves by the likes of Modern And Pfizer/BioNTech, which has developed highly effective COVID-19 vaccines. The numerous delays in filing the Emergency Use Authorization in the United States also didn’t help Novavax’s cause.
However, it can be argued strongly that the pessimists have gone further than the downside with Novavax. First, it joins Moderna and Pfizer/BioNTech as the only companies to achieve vaccine efficacy (VE) of at least 90%. With a high VE and a vaccine differentiated from messenger RNA products from Moderna and Pfizer/BioNTech, Novavax’s COVID-19 vaccine uses a protein to teach a person’s immune system to recognize and fight the SARS-CoV-2 virus. Novavax has a reasonable chance of generating strong recurring revenue globally from its COVID-19 vaccine.
Something else that’s really important to recognize is that Novavax’s drug development platform works. The development and use of NVX-CoV2373 (the company’s COVID-19 vaccine) in the United States and dozens of countries around the world suggests that Novavax can produce mutation-specific vaccines, if needed, or develop combination therapies. Within the next year or two, people may have the option to get a combined flu/COVID vaccine.
Novavax is also sitting on a load of cash. As of June 30, the company had $1.38 billion in cash and cash equivalents. This is more than enough money to advance promising preclinical and clinical trials.
Although Novavax has largely lost the low, if you will, fruit of high-margin COVID-19 vaccine sales in the United States, the potential for global recurring revenue from COVID-19 (aka, booster shots), as well as the expanding its drug development platform, make it a bargain at its current price point.
The third phenomenal business that can double your money by 2027 is the online services market Fiverr International (FVR 3.26%).
Keeping with the theme of this list, Fiverr has taken its shareholders for a roller coaster ride. In three years, the company’s stock went from the mid-20s to more than $300 and back to the mid-20s. Skeptics appear to be concerned about the growing likelihood of a recession in the US and how that could negatively impact a freelance/remote-based business.
While recessions are an inevitable part of the business cycle, they tend to be substantially shorter events than bull markets and periods of economic expansion.
To add to this point, the dynamics of the labor market have been permanently changed by the pandemic. While some workers have returned to the office, the percentage of employees working part-time or full-time from home or remotely has grown significantly. This puts the Fiverr freelance marketplace at the heart of this remote work trend.
On a more company-specific basis, Fiverr offers clearly identifiable competitive advantages. Instead of having freelancers rate their businesses on an hourly basis like virtually all of its competitors, Fiverr’s freelancers list their businesses as a package. This greatly improves cost transparency, which has been a powerful tool in keeping spend per buyer on the rise.
The other significant benefit, as I mentioned earlier, is Fiverr’s superior acquisition rate, or how much the company gets to keep from each deal negotiated on its platform. With most online service marketplaces dealing with acquisition rates in lower and middle teens, Fiverr reported an acquisition rate of 29.8% in the quarter ended June.
Given Fiverr’s sustained competitive advantages and double-digit growth rate, its forward price-earnings ratio of 25 looks like a bargain for opportunistic investors.