In a bull market, growth stocks could be among the first to go up.
After a rough year in 2022, the market recently gave us a little bit of hope. In the first month of the year, all three major indexes went up. And because of that, everyone is ready for the next bull market. Do we have too much hope? I don’t believe that. This is why.
Most bear markets last for about a year. But one thing won’t change, no matter if this market slump lasts a little longer or a little shorter: Bear markets always get replaced by bull markets. That means things will get better, and it’s not too early to start getting ready. When I think of a bull market, I think of growth, and because of that, I think of growth stocks. Should we go back to these players who were beaten up by the market last year? Let’s find out.
Leaving growth behind
As the economy got worse, it’s not a big surprise that some investors stopped buying growth stocks. When things are bad, investors like to put their money into companies that are less affected by rising costs and consumer spending. They look for stable businesses that sell products that people can’t live without. So companies that make drugs or everyday goods may benefit, and their shares may do better than the market. Last year, we saw that happen.
Growth stocks were left behind. Many fell by more than 10%, making them worth less than nothing. Now, let’s think about whether or not we should go back to these players right now. First of all, it’s important to say that if you’re a long-term investor, you don’t have to sell these stocks when times are tough unless you’ve lost faith in the story of a particular company.
If you invest for at least five years, you will probably go through times when the market goes up and times when the market goes down. It’s not smart to change your strategy every time the market changes. Instead, it’s better to come up with a general plan that fits your way of investing and then make changes as needed.
Consider investment style
I mean by “investment style” how you feel about taking risks. If you don’t mind taking some risk, you might prefer growth stocks no matter what the rest of the market does. You should decide whether to buy these stocks based on how much they are worth and how they will do in the long run.
Today, many growth stocks are selling for a steal, but they still have a lot of potential for the future. Now is the best time to add some of these players to your portfolio. This is what I mean by making changes when the chance presents itself.
For example, Amazon (AMZN -0.64%) is trading near its lowest point since 2016 in terms of sales. The company is having trouble right now because costs are going up, but it is taking steps to get through this and come out stronger. And it is still the leader in e-commerce and cloud computing, which are industries with a lot of growth.
Tesla (TSLA -5.03%) is another choice. Even though the economy has been bad, the leader in electric cars has done well. During the fourth quarter, Tesla’s sales, operating income, and net income all hit records. And based on GAAP, the company’s net income for the whole year grew by more than double to $12.6 billion. At the same time, the price of the stock is about 50 times earnings estimates for the next year. This is down from more than 80 a year ago.
Teladoc is as cheap as it has ever been.
Teladoc Health (TDOC -4.15%), a healthcare growth stock, is a great choice. Last year, this company, which was the leader in telemedicine, went down because it had to pay goodwill impairment charges because of an acquisition. But the company has made progress in reducing its loss. Sales and online visits have steadily gone up by more than 10% each month. Teladoc has also kept adding new members. In relation to sales, the price of the stock is at its lowest level ever today.
There are a lot of other examples of cheap growth stocks in different industries that are great buys right now.
All of this means that you should buy growth stocks right now if they fit into your investment plan. Even though we don’t know when it will come, there will be a bull market. It’s never too early to buy stocks that could do well in this market and, even better, give you long-term growth.