Bear Market Buys: Where to Invest $5,000 Right Now – The Motley Fool

Investing in some top growth stocks can be an excellent way to build up your portfolio. A $5,000 investment that grows at 10% per year for 20 years will be worth roughly $34,000. If it grows at a rate of 15%, then its value will top more than $81,000. It may not be enough to retire on, but investing $5,000 into a few high-performing stocks can significantly strengthen your financial position in the future.

Three growth stocks that look like great places to invest $5,000 right now include Align Technology (ALGN 5.21%), Nvidia (NVDA 5.53%), and Mastercard (MA 2.83%).  Although they’re struggling this year, their long-term trajectories are promising. Buying them while near their lows can lead to some great gains in the years ahead.

1. Align Technology

What makes Align Technology a top growth stock is Invisalign, its clear aligner brand. Strong brands can drive customer loyalty and make it easier for a company to grow its business without having to spend heavily on sales and marketing. Invisalign is a top name in the dental industry and has been the key behind Align’s strong sales numbers.

Last year, the revenue of nearly $4 billion grew by 60% from the $2.5 billion that Align reported in 2020. The bulk of its revenue comes from its clear aligners, which brought in $3.2 billion and accounted for over 82% of all sales. The company’s systems and services segment, which includes imaging devices, makes up the rest. Align also posts strong bottom lines. In 2021, it reported a 20% profit margin with its net income totaling $772 million.

A key opportunity for Invisalign is with teens. Although shipments of Invisalign cases were up just 0.5% year over year during the first three months of the year (in part due to lockdowns in China and the war in Ukraine affecting its business), the number of cases shipped to teenage patients grew by 6%. And they now account for 29.3% of all volumes versus 27.7% a year ago.

While global economic conditions have slowed down Align’s business of late, there’s still loads of potential for the company. And with the healthcare stock recently hitting 52-week lows (it’s down 60% year to date compared to the S&P 500‘s decline of 18%) and trading at a more modest price-to-earnings multiple of 29 — compared to more than 80 a year ago — it could make for a great buy today.

2. Nvidia

Despite the chip shortage and all the potential for digitalization that should make Nvidia a top growth stock for years, its share price has been tumbling this year. Down 43% year to date, it isn’t far from a new 52-week low that it hit earlier this month. 

But investors shouldn’t be deterred by that. Nvidia has significant potential in addressing important needs for chips as more businesses go to the cloud, and seemingly everything is more connected to the internet than ever before. It’s an easy stock to justify buying and forgetting about. In just two years, the company’s sales have more than doubled to $26.9 billion for the year ended Jan. 31.

As with Align, one of the deterrents that perhaps made investors lukewarm about buying the stock was its hefty valuation. Last year, Nvidia was trading at more than 90 times its trailing profits. Today, it’s down to a multiple of around 45. Even though it isn’t a value stock at that kind of a valuation, investors should expect to pay a premium for a business that generates billions in free cash flow and has profit margins north of 30%, all while possessing some incredible long-term growth opportunities.

3. Mastercard

Stimulus payments propped up the economy during the early stages of the pandemic, and now I suspect credit cards are filling that role. It’s the most likely conclusion, given that spending levels remain elevated.

Mastercard releases a SpendingPulse report on a monthly basis to show where it’s seeing sales rise. And in June’s edition, spending on retail, both in-store and online, was up year over year. Not only were consumers spending more on lodging, airlines, and fuel, but even spending on jewelry was up 16% from the same month last year. Across the board, Mastercard reported seeing sales growth on top of an already strong month a year ago.

As the economy opens back up, the desire to spend is strong in the face of inflation. Consumers are showing a willingness to use their credit cards even though there are concerns that tougher times (i.e., a recession) may be looming. In both good times and bad, Mastercard and other credit card providers can benefit from increased spending.

Shares of Mastercard are down 7% this year, and the stock is about 10% away from its 52-week low. At 35 times earnings, it’s trading at a premium, but it could be well worth it as this is a high-performing business that, over the past 12 months, has netted a profit margin of 48%.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Align Technology, Mastercard, and Nvidia. The Motley Fool has a disclosure policy.