Growth Stocks: Key Takeaways
- Growth stocks represent companies that prioritize future growth…
- These companies invest profits into propelling growth…
- The market considers them ‘volatile’ and ‘risky’ because they (intentionally) lose money every quarter…
Growth stocks have been the story of this major bull run in the market. Yes, tech companies led the way. But other sectors prioritize growth over profits. Check out six that stand out to me and read on to learn even more…
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- Cloudflare, Inc. (NYSE: NET … read my analysis here)
- Asana, Inc. (NYSE: ASAN … read my analysis here)
- Adobe Inc. (NASDAQ: ADBE … read my analysis here)
- Generac Holdings Inc. (NYSE: GNRC … read my analysis here)
- Old Dominion Freight Line, Inc. (NASDAQ: ODFL … read my analysis here)
- Zoom Video Communications, Inc. (NASDAQ: ZM … read my analysis here)
Table of Contents
Growth Stocks Background
Growth stocks are usually those ‘moon shots’ you’ll hear a lot about on FinTwit or Reddit … These companies are growing FAST.
Growth companies tend to invest their profits into their futures. Any money they make goes right back into the business.
It’s basically like ‘delayed gratification’ in business. Growth stocks are more concerned with rapid growth than anything else.
Some of the more conservative players in the market may not like growth stocks because they come at a hefty price. But they are almost always some of the best-performing stocks…
6 Growth Stocks to Keep on Your Watchlist
There are a lot of great growth stocks out there right now. But these six entice me…
Growth Stock #1: Cloudflare, Inc. (NYSE: NET)
Cloudflare is a web infrastructure company that aims to secure websites and prevent malicious attacks.
Companies like Cloudflare will always have a place in a world that relies on the internet more and more each day … Companies want safe, protected websites. Cloudflare provides that.
Growth Stock #2: Asana, Inc. (NYSE: ASAN)
Asana operates a work management platform that allows users to organize tasks. I can say from personal experience that Asana is great for getting work done…
Asana had its IPO in 2020 and has soared above expectations. It’s still in the growth stage and losing money, but it continues to grow revenues each quarter.
The company retains its customers, too. That can be attractive to potential customers and a great sign for a growing company. Customers only stay if they’re happy, right?
Some of Asana’s paying customers include Google, Spotify, Uber, and Slack. Nice crowd, eh?
Asana reported a 61% year-over-year increase in revenues back in June. It’s projecting similar growth over the next year.
ASAN gained 181% over the past year, but its rapid climb has slowed recently.
Growth Stock #3: Adobe Inc. (NASDAQ: ADBE)
Adobe is a software company providing digital media products like the Creative Cloud. This includes Photoshop, InDesign, Premiere Pro, and other tools for photo, video, and doc editing.
Adobe recently made an acquisition that could bolster the Creative Cloud … The company bought Frame.io for $1.275 billion.
This could allow users to share projects on Premiere Pro, After Effects, and Photoshop to others and get additional feedback. Frame.io has large customers such as Google, Netflix, and Turner…
That acquisition shows that Adobe’s not done growing. Creative Cloud is Adobe’s biggest money-maker and it’s angling to bring in more subscribers.
And Adobe’s willing to spend to make that happen.
The company makes a hefty profit, unlike some other growth stocks. It reported a 23% increase in revenue last quarter.
And best of all, ADBE stock is on fire … It gained 37% in 2021.
Growth Stock #4: Generac Holdings Inc. (NYSE: GNRC)
Generac manufactures and sells power generation equipment such as residential and commercial generators. It also offers other products in the energy space.
We often talk about energy stocks — but not the companies that help store that energy. Generac provides energy storage systems as well as grid service solutions to keep residential and industrial markets running.
Generac generators mostly run on fossil fuels. But they also offer a solar-powered system. I don’t think it would be surprising to see more clean energy products enter GNRC’s portfolio.
Generac is coming off its best quarter yet. The company reported a 68% increase in net sales and a 92% increase in net income…
It also made two acquisitions in the quarter. Generac acquired Deep Sea Electronics and Chilicon Power to expand its portfolio of energy collection storage.
GNRC is up 92% since the beginning of 2021 and continues to climb…
Growth Stock #5: Old Dominion Freight Line, Inc. (NASDAQ: ODFL)
Old Dominion Freight Line is a less-than-truckload transporter in North America. That means it transports relatively small loads of freight.
The company reported a 47% increase in total revenue at the end of its last quarter
Notice a trend for this list? These stocks play vital roles in the economy and aren’t likely to go away anytime soon.
We know the internet is here forever, so businesses tied to that will always be worth looking at. And we know transportation of goods won’s away, either. Heck, demand will probably go up for it as time goes on…
ODFL stock can be one of those slow churners that prints money over time. But it can also have big pops if the right catalyst comes along.
Growth Stock #6: Zoom Video Communications, Inc. (NASDAQ: ZM)
Zoom was a major winner during lockdowns … When people were forced to stay home, they had no choice but to use Zoom for school and work meetings.
The company reported great numbers for its second quarter, showing just how integral the company has become in modern times…
“Our ability to keep people around the world connected, coupled with our strong execution, led to revenue growth of 355% year-over-year in Q2 and enabled us to increase our revenue outlook to approximately $2.37 billion to $2.39 billion for FY21, or 281% to 284% increase year-over-year,” CEO Eric S. Yuan said.
Anytime someone talks about their business improving by 300% or more, the market tends to take notice…
Zoom also recently purchased Five9 for $14.7 billion, making it the company’s biggest acquisition to date. Zoom plans to offer its enterprise customers the Five9 platform for better customer service.
ZM stock rose 880% as of October 2020 but has since fallen to a modest 471% since the end of 2019. We’ll see how this stock does as things go back to ‘normal.’
Top 2 Low-Risk Growth Stocks
C’mon. There’s no such thing as a ‘no risk’ trade. But some stocks can make traders feel a little more comfortable…
Low-Risk Growth Stock #1: The Home Depot, Inc. (NYSE: HD)
Home Depot was a major lockdown winner. People stuck at home staring at their walls realized those walls were ugly and needed some work.
Or maybe they wanted to build a new patio or deck. Whatever happened, a lot of people went to stores like Home Depot to get lumber, tools, paint, and DIY supplies.
HD reported an 18.6% increase in sales in its last quarter and had its first $41 billion quarter ever.
The company also said it’s doubled its online sales since 2019. Home Depot didn’t give many specifics about its digital platforms except that it’s seeing tremendous growth.
The app apparently saw increased conversion rates and a record number of downloads during its latest quarter.
Every store is competing with Amazon these days. Home Depot’s digital success could be a great sign for future growth.
HD has risen 129% since March 2020 and 22% in 2021.
Low-Risk Growth Stock #2: O’Reilly Automotive, Inc. (NASDAQ: ORLY)
I don’t look too much into fundamentals because they don’t always matter to traders. But it feels especially necessary here.
We often look at companies with a price-to-earnings (P/E) ratio of less than 25 as more of a ‘value stock.’ But ORLY might be breaking that mold.
ORLY has a P/E ratio of 21.5, but the stock gained nearly 41% since the end of January…
This company is so solid and undervalued that the market has no choice but to buy its stock. That’s why understanding fundamentals can be important for traders…
Is this great run guaranteed to continue? Of course not. There are no sure things in the market.
But picking strong companies with market support can make you feel better about the inherent risk of making a trade.
O’Reilly is similar to Home Depot … People would rather fix things themselves than pay some contractor or mechanic. And its stores offer simple professional services like battery swaps and check engine light code readings.
Top 2 Short-Term Growth Stocks
Who knows how strong these stocks’ long-term prospects are … But for now, they’re worth watching.
Short Term Growth Stock #1: XPeng Inc. (NYSE: XPEV)
EV stocks have had a tough year. XPEV has been no different.
The past is the past, though … Or we hope it is, at least.
XPeng is one of the many fascinating China EV plays that could be a home run or a total whiff. We have no idea whether it will materialize into real car companies or not.
But XPeng recently announced a 439% increase in vehicle deliveries and a 536% increase in revenues since this time last year.
XPeng delivered about 17,400 cars in its latest quarter. That puts it about 11,000 behind Tesla and 4,000 behind NIO…
XPeng doesn’t have to beat Tesla or NIO to have success. China is a huge market for EVs … There can be multiple winners.
The stock is actually down about 8% on the year. But with the company’s rapid growth in deliveries and revenue, I think it’s worth watching.
Short Term Growth Stock #2: Nucor Corporation (NYSE: NUE)
Steel prices are up 57% since tanking at the early stages of lockdowns. That’s helped Nucor thrive.
Nucor is a manufacturer that provides steel mostly for construction projects. The company is looking to enter the automotive market, which is a large steel sheet customer…
The company also expects to have a place in the ‘rebuilding of America.’ The $1 trillion infrastructure bill should create an increased demand for the raw materials that Nucor provides.
Nucor saw a 59% increase in sales through its first two quarters compared to 2020. It also announced two acquisitions to broaden its business in August.
NUE is a good stock to watch long term. But its potential for new government contracts makes it even more intriguing right now…
The stock’s up 124% year to date.
Top 2 Long-Term Growth Stocks
These companies could be on traders’ radar for a long time…
Long Term Growth Stock #1: Microsoft Corporation (NASDAQ: MSFT)
How could Microsoft possibly get any better than this? Its stock has gained 120% over the past two years and 38% in 2021.
MSFT recently reported a 21% growth in revenues year over year and is seeing even better growth with Azure. Azure is Microsoft’s cloud service … It saw a 51% increase in revenue.
Azure will likely soon be Microsoft’s largest source of income. For now, it’s Office 365, which is integral to many businesses … And Microsoft is upping its price.
Microsoft doesn’t need a bunch of new shiny toys to grow … It just needs to keep improving its current offerings.
This is one of the most valuable companies in the world. Growth is almost inevitable. This stock moves slowly. But keep an eye on strong catalysts for stronger moves.
Long Term Growth Stock #2: Eaton Corporation plc (NYSE: ETN)
Eaton is a power management company. The company provides parts and components for vehicles and aircraft. It also provides services to utilities and residential customers.
Eaton is another company that stands to benefit from a focus on rebuilding America’s infrastructure.
For example, it wants to help improve the safety and efficiency of rail systems. Its eMobility business could play a huge role in the ‘electrification’ of transportation. The company’s systems are designed to convert, distribute, and manage power.
And its grid solutions could be key as the world weens off fossil fuels. Eaton aims to both protect the security and manage the efficiency of grids.
The company reported a 35% increase in sales in its most recent quarter. And how about that stock? ETN is up 65% over the past year…
Conclusion
Those were my top growth stocks to watch in 2024.
There are so many good options out there … So dig in and do your research.
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Keep an eye on the trends and stay prepared.
How do you watch and trade growth stocks? Let me know with a comment below!