3 Unstoppable Growth Stocks to Buy If There’s a Stock Market Sell-Off
The stock market continues to keep investors on their toes, with the S&P 500 down about 19% year to date, but up 6% over the past six months. As we approach the start of a new year, you’ll likely be evaluating the state of your portfolio and considering which stocks you want to buy, hold or add.
While growth stocks have fallen out of favor with many investors over the past year, and there are undoubtedly growth-oriented companies that won’t return to their former highs, some winners remain. Amazon (AMZN -0.67%), Shopify (SHOP -0.82%)and Veeva Systems (VEEV -0.96%) are three winners to consider adding to your portfolio before the year is out. If you’re worried about another selloff in 2023, each of these companies has what it takes to last for the long haul.
Amazon needs no introduction. The tech behemoth has remained a winner for investors throughout its fair share of market cycles, surviving the bursting of the dot-com bubble and the Great Recession. It hasn’t been all sunshine and rainbows for investors in the 25 years since Amazon became a publicly traded company. For example, at the height of the dot-com bubble crash two decades ago, Amazon shares shaved as much as 90% of their total value.
However, long-term investors in Amazon have been rewarded time and time again with compounded returns. Over the last decade, Amazon has delivered a generous total return of over 609% for investors.
Amazon’s success, while so many other tech companies have floundered and failed over the years, can be attributed to a variety of catalysts. These range from the strength of its leadership to the diversity of its business model to its track record of disrupting profitable, fast-growing markets. As things stand today, Amazon remains a focal presence in the worlds of e-commerce and cloud computing, while steadily expanding its footprint in key markets ripe for additional disruption such as telehealth, grocery delivery and entertainment.
Amazon controls about 38% of the e-commerce market in the US. Keep in mind that the US e-commerce market accounts for a significant portion—almost $905 billion—of the global addressable e-commerce space, which is worth $5.7 trillion.
Amazon’s other key business segment, Amazon Web Services, saw revenue rise 27% year over year in the most recent quarter alone, even as overall revenue growth remained steady but moderated at 15%. The company is still knocking out Alphabet and Microsoft as the top dog in the cloud computing space, with a 34% share of this $57 billion market.
Short-term economic factors such as rampant inflation increasing the cost of doing business and declines in consumer spending will inevitably affect the growth rate for Amazon. However, these factors are not specific to Amazon and affect companies in virtually every sector of the market. Over the long term, Amazon’s robust collection of businesses and strong balance sheet (the company had $58.6 billion in cash and investments on hand at the end of the most recent quarter) could help it weather the storm and continue to grow. delivering growth for investors in the years ahead.
Shopify’s journey over the past year has been anything but smooth, and long-term investors in the stock have certainly been in for a bumpy ride. Shares of Shopify have surged 72% over the past year as investors increasingly lost faith in growth-oriented businesses and looked for more stable vehicles to invest their capital.
As a shareholder of Shopify, I have had to revise my thesis several times over the past year because I owned the stock. However, I continued to hang on through the storm for several reasons. First, much of the selloff in Shopify’s stock that investors have seen has not been tied to long-term, durable changes in the underlying business. Meanwhile, Shopify remains one of the leading e-commerce platforms in the world, used by everyone from mom-and-pop businesses to major global brands.
Even though growth has slowed compared to pre-pandemic levels — and it would have been unrealistic to think that increased buoyancy would continue indefinitely — Shopify has continued to streamline its services and tools for merchants, invest in its fulfillment network, generate revenue to grow, and increase its cash position. While elements like the macro environment, changes in consumer spending and Shopify’s aggressive growth strategies have weighed on its profits, those net losses are narrowing (the company narrowed its net loss from $1.2 billion in the second quarter to $158 million in the third shaved. quarter).
Shopify leads the e-commerce platform market in the US with a 25% market share. It also holds the number 2 spot worldwide, with a market share of 19%, second only to WooCommerce. Taking a step back and looking at Shopify’s growth over the previous decade, the company delivered total revenue growth of 585%, while its operating cash flow increased by 6,280%.
Personally, my thesis for buying Shopify remains intact, and not because short-term headwinds like a potential recession aren’t likely to affect its business. But over the long term, I still believe the company can continue to deliver on its vision as a leading one-stop shop for merchants to start a business of any kind from anywhere in the digital age.
Shopify’s continued growth and massive market footprint bode well for its future success, well beyond what investors can expect in the next one to two years. For risk-tolerant investors, the stock remains a compelling buying opportunity, even in the current bearish environment.
3. Veeva Systems
Like most other cloud computing stocks, it’s fair to say that it hasn’t been a banner year for Veeva Systems’ stock. Shares are trading about 34% lower year-to-date, but again, this is not linked to company-specific factors or durable headwinds.
Veeva Systems is a bit unique in the cloud inventory universe in that it focuses its services exclusively on the life sciences industry. It does this on a massive scale, with well-known clients such as Merck and Modern relies on its software to streamline day-to-day operations.
Over the 10-year period, Veeva Systems grew its annual revenue and earnings by 1,300% and 2,200%, respectively. It also increased its operating cash flow by 2,400% in that time frame. The stock has also been a high performer for investors over the years, delivering a total return of nearly 400% over the trailing 10-year period. Meanwhile, analysts believe the company can grow its annual revenue by an average of 13% for the next five years alone.
It’s true that many companies are cutting costs right now, and some cloud businesses are taking a hit as a result. Veeva recently announced that it is partnering with Sales teama long-term partner to serve customers in the pharmaceutical and biotechnology industries, once its contract expires in 2025. However, Veeva continues to expand and build on its existing partnerships, with more than 1,000 customers and counting.
The type of customers that Veeva Systems serves also tend to be more resilient than most in a recessionary environment due to the non-cyclical nature of their industry. And even cost-cutting measures are unlikely to have much of an impact on Veeva Systems over the long term. The company’s software and services are an essential component of operations for some of the world’s largest biotech and pharmaceutical companies to function on a day-to-day basis.
Its software helps these companies accomplish numerous tasks, including streamlining the clinical trial process, managing regulatory registrations and submissions, simplifying data management, and managing quality control and compliance initiatives. This gives Veeva Systems tremendous room to grow within and beyond the current environment. As such, the stock can be a welcome addition to a well-diversified portfolio for long-term investors.