The current market is volatile, as strength in energy stocks offset the tech stock selloff of 2022 and the U.S. bank crisis of 2023. The impact of rising interest rates and inflation is gradually weakening consumer demand. Economists expect a mild recession in mid-2023, but strength in the first-quarter macroeconomic data is building the suspense. Is a recession a false alarm or delayed? These macro numbers will determine whether the central bank hikes interest rates.
Investing in the five-year growth story
The market uncertainty has created an opportunity to buy growth stocks at a discounted value. Once the bearish momentum from a recession is over, two growth stocks could increase significantly in the recovery rally. The macroeconomic uncertainty has delayed electric vehicle (EV) and e-commerce growth and faded the crypto buzz.
But these growth waves could revive in the next five years; it’ll likely take three years for the economy to recover from a recession and two years for the secular growth wave to materialize before growth rates normalize. Five years is an estimated time frame. It could take longer if there is another macro or industry-specific challenge.
Fintech company Nuvei (TSX:NVEI) is in the payments business. It provides e-commerce companies, gamers, financial services, and digital products a platform to send and receive money from different countries and currencies, including crypto. The very nature of the business depends on business and consumer sentiment. The more transactions on its platform, the higher the revenue for Nuvei.
Nuvei stock fell 65% in early 2022 when the tech and crypto bubble burst. It fell another 60% between April and December 2022, as rising interest rates slowed consumer demand.
Nuvei has many growth catalysts, like the recovery of e-commerce volume and an increase in crypto value. The company is riding the secular wave of global payments through different modes. It recently acquired Paya to enter the non-cyclical verticals like utilities and government, giving Nuvei a stable source of revenue. Government contracts have many indirect benefits. They add value to the service quality, helping companies win more orders.
Nuvei has a sufficient cash reserve of $752 million to fund losses, tap growth opportunities, and withstand a recession. It also has the right business and technology to recover in a growing economy.
BlackBerry’s (TSX:BB) turnaround is delayed for a long time due to various industrial and macro headwinds. This software and cybersecurity company has the tech and the advantage of government contracts. However, the macro weakness has forced businesses to postpone IT spending, reducing BlackBerry’s cybersecurity revenue.
Moreover, supply chain issues have created production bottlenecks in auto production, delaying BlackBerry’s royalty revenue from the QNX system. But these delays did not impact BlackBerry’s long-term growth prospects of EV adoption and Internet of Things (IoT) proliferation for mission-critical applications.
BlackBerry has the financial flexibility ($487 million cash and no debt) to handle losses and fund research and development. An economic recovery could boost BlackBerry stock, as it realizes the pent-up demand in its order book.
How to invest in these magnificent growth stocks
Now is a good time to start buying these magnificent growth stocks. Nuvei and BlackBerry stocks have jumped 61% and 22%, respectively, year to date, but they could fall if the recession hits. Instead of waiting for the recession dip, start buying them in small quantities, as they are trading at a discount from their average trading price.
If you invest a little over $400 every month through the 2023 bearish market, you can reduce your purchase cost. After these stocks bottom out in a recession, you can stop buying and hold them for the next five years to take advantage of the recovery rally and secular trends.