There’s no doubt about it. The bull market over the past decade has been defined by growth. Where there’s been growth, the fastest-growing stocks have seen share price over-performance.
And this trend isn’t slowing. So far in 2018, growth stocks are up double-digits. Value stocks? They are basically flat on the year. And, considering I fully expect this bull run to continue thanks to robust earnings growth and unprecedented consumer strength, I also fully expect growth stocks to continue to outperform.
To many, that means it is time pile back into FAANNG. I agree. But, don’t buy just FAANNG stocks. Instead, diversify your exposure to growth, and buy the fastest-growing stocks that are not in the FAANNG group.
What are those fastest-growing stocks outside of FANNGG that investors should buy and hold in this bull market? Let’s take a look at five of my favorites.
Fastest-Growing Stocks to Buy & Hold: Square (SQ)
One of the shining stars of this bull market has been digital payments processor Square (NYSE:SQ). Year-to-date, SQ stock is up 160%. Over the past year, it’s up 250%.
Square has rallied in such a big way because this company is leading commerce into a new era of cashless transactions. Recognizing that consumers globally don’t use cash anymore and prefer to use either card or some digital form of payment, Square has built out robust solutions to facilitate those transactions at scale. Quite simply, all a retailer needs is a Square payment processor, and they can handle all types of transactions.
SQ stock isn’t cheap here. Far from it. The stock trades at nearly 200x forward earnings. But, the big valuation is warranted because the company has tiny share in a huge global market, and its present momentum (consistent 30%-plus gross payment volume growth) implies the company has tremendous potential to grow market share rapidly. Plus, tangential services like Caviar, Instant Deposit, Cash Card and Square Capital are on fire right now, and super-charging an already super-charged growth narrative.
Long term, this stock looks like a big winner. Thus, so long as the current bull market persists, SQ stock will head higher.
Fastest -Growing Stocks to Buy & Hold: Chegg (CHGG)
Another shining star of the bull market has been digital-education platform Chegg (NYSE:CHGG). Year-to-date, CHGG stock is up more than 90%. Over the past year, it’s up 130%.
Much like Square is pioneering the era of cashless transactions for consumers globally, Chegg is pioneering the era of connected learning for high school and college students globally. In plain English, high school and college students often need help studying or help on homework. That is where Chegg comes in. For a subscription fee, they offer a plethora of academic assistance tools like tutors, step-by-step homework solutions, access to solution manuals and so on and so forth.
This a huge market, and much like Square, Chegg is tapping into only a small portion of it. There are 36 million high school and college students in America. All 36 million of those students could benefit from using Chegg as their connected learning platform. Today, though, Chegg only has 2.2 million subscribers. That means Chegg is tapping into only about 6% of its total addressable market. In the United States alone. Globally, the market is much bigger, so it is clear that Chegg has long runway ahead for big growth.
CHGG stock isn’t cheap. It trades at 70x forward earnings. But, there is reason to believe that multiple is a bargain if you think Chegg’s connected learning platform can be adopted by 30%, 40%, or 50% of all high school students in America. Thus, so long as Chegg’s numbers remain strong and the bull market remains in-tact, CHGG stock should head higher.
Fastest-Growing Stocks to Buy & Hold: iRobot (IRBT)
The road hasn’t always been pretty, but consumer robotics leader iRobot (NASDAQ:IRBT) appears to be getting its groove back. While the stock is up only 10% over the past year, it is up 50% over the past 3 months and back around all-time highs today.
At its core, iRobot is a consumer robotics company. Right now, that encompasses robotic vacuum cleaners, namely the Roomba. That is a nice growth market which iRobot is dominating thanks to a superior product and better marketing. But, the real growth story behind iRobot isn’t in robotic vacuum cleaners. It is in all consumer robots, spanning from robotic vacuum cleaners to robotic lawnmowers to robotic window cleaners, so on and so forth. Due to its unparalleled leadership in the robotic vacuum space, iRobot looks positioned to dominate these other nascent consumer robotics markets, too.
The sum of those consumer robotics markets constitute a huge opportunity for iRobot. Investors are starting to realize this. At first, investors were hesitant about iRobot’s spending big to drive big growth. That is why IRBT stock has been choppy for the past year. Now, though, investors are starting to realize that big investments are actually expanding this company’s opportunity, and elongating this company’s long-term growth runway.
As such, IRBT stock is one of those fastest-growing stocks that seems to finally have the confidence of the market behind it. With that confidence in its back pocket, IRBT stock could soar over the next several years as this company pushes the consumer robotics space mainstream.
Fastest-Growing Stocks to Buy & Hold: Shopify (SHOP)
In a long-term window, few high-growth stocks have been as successful as e-commerce enabler Shopify (NYSE:SHOP). Over the past 3 years, SHOP stock is up more than 400%. Year-to-date, the stock is up 40%.
In other words, this is a red-hot stock that isn’t cooling all that much. It won’t cool anytime soon, either. The whole world is moving towards decentralization. Technology companies are taking power from the few, giving it to the many, and creating systems that optimally pair supply with demand. Uber did this in the transportation industry. Airbnb did this in the accommodations space. YouTube has done it in the entertainment world. Netflix (NASDAQ:NFLX) has done it in the content production realm.
Shopify is taking those same decentralization and individual empowerment principles, and applying them to the digital commerce space. The company provides digital commerce tools which allow anyone to sell anything online. In the same way that Uber said anyone can drive and make money and that Airbnb said that anyone can rent out living space and make money, Shopify is saying that anyone can run an e-commerce shop and make money.
This is the future of e-commerce. And Shopify is spearheading it. As such, SHOP stock should be a big winner over the next several years.
Fastest-Growing Stocks to Buy & Hold: Axon (AAXN)
Although other high-growth stocks on this list have had red-hot runs, none have been as hot as Axon (NASDAQ:AAXN). In 2018 alone, AAXN stock is up 170%.
The big rally can be attributed to the company’s pivot from a hardware company to a software and hardware company. Axon was formerly known as Taser International, and the business used to be selling tasers and other smart weapons to law enforcement agencies around the world. While selling all those tasers, the company also developed body cameras and accompanying cloud solutions to help store and analyze law enforcement data.
Because the company saw the writing on the wall that this body camera and cloud business was the future, they rebranded as Axon last year, and decided to give away a body camera for free to every police officer in the U.S. in an attempt to win over body camera and cloud contracts. That plan has worked out beautifully. Now, essentially everyone who took part in the free trial, is a paying customer of Axon.
This growth story is still in its early stages. Law enforcement agencies globally are outdated. They desperately need a technology makeover. They also desperately need to reduce police shootings and misbehavior, two hot topics which have eroded the public’s trust in police. Axon provides the best-in-class solutions to fix both of those problems. As such, the big rally in AAXN stock will persist so long as this bull market lives on.
As of this writing, Luke Lango was long SQ, CHGG, SHOP, and AAXN.