No investment strategy suits all the people all the time. This is particularly true for young investors in their 20’s and 30’s. Youth not only has social advantages; it can provide significant margin for your portfolio to grow. As such, high-growth stocks are ideal for the young-adult, millennial demographic.
Talk to any financial advisor, and more often than not, they apply the Pareto principle for 20- or 30-somethings. Colloquially known as the 80-20 rule, advisors recommend that young investors have 80% of their portfolio in stocks, and the remainder in safer, interest-yielding assets. When it comes to millennial stock allocation, spring chickens should really consider high-growth stocks.
Time is money, and in many cases, time is more valuable. That’s because time can “buy” you money, but never the opposite way around. In this case, a younger investor’s additional working years can help mitigate investments that have gone awry. Moreover, extra time allows riskier investments to fully expand to their potential.
But don’t just look into risk-reward ratios for their own sake. Instead, as a young investor in his or her 20s or 30s, you should broaden your horizon. While I’m not against trading current trends, this is a perfect chance to advantage longer-term growth forecasts.
With that in mind, here are the top 10 high-growth stocks for young investors.
[Editor’s Note: This story originally appeared on Sept. 25 but has since been updated and republished to reflect new developments.]
Whenever discussions about high-growth stocks arise, Amazon (NASDAQ:AMZN) invariably makes most analysts’ lists. What’s not to like here? Not only does AMZN leverage an enviable track record in the markets, management continues to forge ahead into new frontiers. Amazon is a disruptor among disruptors.
But sometimes, high-growth stocks are so obvious that it’s not. We all know the adage that what goes up must come down. This applies to any investment, and I’m sure AMZN is no exception — just look at its 15% drop in the past month. However, no other company enjoys what is likely an impenetrable business, and that 15% drop reduces its year-to-date gains to “only” 28%.
As I previously discussed, AMZN is on the verge of “unprecedented greatness.” Those of you who are in your 20’s and 30’s have some recollection of a time when e-commerce didn’t overwhelmingly dominate the retail sector. But we’re so close to a generation coming of age that has no clue about the prior brick-and-mortar hegemony.
When Generation Z enters the workforce en masse, they will buy through Amazon and other e-commerce channels, no question. That’s why you must consider AMZN stock.
Carvana (NYSE:CVNA) takes a brilliant concept and brings it into fruition. Generally speaking, millennials don’t share the same love for the automobile as did prior generations. Part of the decline in interest is the haggling over the price that used to be a given when buying a new car.
Enter Carvana. CVNA combines the tech wizardry that young people love with a centuries-old retail industry. Rather than negotiate with pushy or unsavory salespeople, buyers can instead browse cars online. When they find one they like, CVNA delivers their vehicle to their driveway. Plus, Carvana offers a money-back guarantee to soothe concerns about buying a car sight (almost) unseen.
Considering that young people do nearly everything online, Carvana is likely the future of car buying. That’s one reason to buy CVNA stock. The other? Margins. Once the company firmly establishes itself, it has the potential to earn serious bucks. That’s because CVNA charges a premium for its convenient services.
So far, though, customers are willing to pay it, and that trend will continue with Gen Z coming aboard.
TriNet Group (TNET)
For those of you who have worked in Fortune 500 companies, you realize the intensity of large-scale organizations. In order to handle the needs of tens of thousands of workers, the biggest companies employ the best human-resources team. But what the needs of small and mid-sized businesses? That’s where TriNet Group (NYSE:TNET) comes in.
TNET provides full-service HR for companies that are still in their growth phase. Essentially an outsourced HR firm, TNET offers comprehensive services for smaller organizations, but without the massive overhead. Therefore, management can concentrate their resources on their expansion strategies.
TNET stock also makes sense from an industry trend point of view. Experts predict that by the year 2020, an astounding half of the U.S. workforce could be comprised of freelancers. Additionally, small businesses that employ fewer than 100 workers are not only becoming more prominent, they’re collectively hiring millions annually.
This new digital economy will require HR services. As a result, you’ll want to keep a close eye on TNET stock.
Canopy Growth Corp (CGC)
The legal-marijuana industry generates significant controversy. However, one thing cannot be denied: high-growth stocks levered towards cannabis have been growing. One such name is Canopy Growth Corp (NYSE:CGC). Year-to-date, CGC shares are up over 28%, and that’s after a substantial pullback.
I’m digging CGC primarily because it’s the most well-capitalized marijuana investment. Canopy sported a $10 billion-plus market cap, substantially higher than Aurora Cannabis’ (NYSE:ACB) $6.2 billion. As InvestorPlace’s own Bret Kenwell pointed out, that market cap rivals several well-known companies, including Macy’s (NYSE:M) and Chipotle (NYSE:CMG).
Ultimately, Kenwell advised to wait for a correction on CGC before jumping onboard, and that may now have happened. Either way, young investors must keep CGC on their short list.
By the time millennials are looking at retirement, marijuana will have lost its Schedule I classification — likely long before this point. History shows that the Prohibition era failed to curb Americans’ desire for alcohol. History will eventually prove the same for cannabis.
Indeed, as the Pew Research Center demonstrates, attitudes towards legalization have shifted positively. It’s only a matter of time before the government listens to the will of the people. When that day comes, CGC will explode even higher.
Square’s (NYSE:SQ) appeal is immediately recognizable to anyone who observes business trends. As we discussed for TriNet Group, small businesses have grown rapidly since the Great Recession. Given the nature of technology in our lives, companies today value agility and specialization more than outright size.
What makes SQ stock a compelling investment is that it evens the playing field for small businesses. Square provides portable credit-card readers that attach conveniently to your smartphone. That enables entities ranging from sole proprietors to small corporations to quickly setup a payment platform.
Another factor driving SQ stock for the longer term? An increasing number of Americans are going cashless. According to a CNBC report late-last year, 50% of surveyed individuals reported they only carry cash half of the time they’re out and about. Those that do carry cash usually hold $50 or less.
Logically, this means we should see fewer cash-only businesses moving forward. And the types of businesses that would have once been cash only will likely gravitate towards Square’s unique and convenient solution. Despite SQ stock pulling back from September highs, it still has significant potential.
I first covered Control4 (NASDAQ:CTRL) in late July of this year. Since then, CTRL stock has jumped as much as 47% in the markets. But that’s not the only reason why I’m including Control4 on this list of high-growth stocks. Like the other mentioned names, CTRL will likely gain on broader social trends, making it a strong pick for young investors.
Control4 specializes in home-automation solutions, providing clients with interconnectivity benefits along with security. Given that anything can happen these days, people love the peace of mind of having an integrated smart-home system.
But beyond the practicality that Control4’s products and services provide, its target audience is extremely receptive to the company’s offerings. Experts forecast that by the year 2020, home automation will become a $40 billion industry. Further, 47% of millennials own smart-home products. And 81% of prospective homebuyers are likely to select a home that has installed automation services.
In other words, among high-growth stocks, CTRL is a no-brainer.
General Electric (GE)
General Electric (NYSE:GE) is a controversial pick for many reasons, but the biggest is this: for years, GE has become a negative-growth stock. Why on earth would I then include it among high-growth stocks?
Admittedly, the idea isn’t conventional and considering its history, GE stock is incredibly risky. The markets agree, selling it off by 55% YTD and 38% in the last month alone. But at the same time, the opportunity is enticingly lucrative. That sentiment is doubly valid for young investors who have the extra margin to patiently wait out the current trouble.
The question everybody asks is if management can truly turn this sinking ship around. While speculative, I think GE has a legitimate chance. As I detailed a few weeks ago, most analysts are bearish on General Electric due to its lagging Power division. The fear is that renewable energy will overrun the company.
I say, not so fast! While renewable energy “works,” it’s still economically inefficient and while this is being corrected, GE has time to adapt, whether that means growing its own renewable energy offerings or compensating for lost revenue in other areas.
That’s the ticket for GE stock. However, it will take time, which suits young investors perfectly.
Voyager Therapeutics (VYGR)
As millions of families worldwide can attest, watching a loved one suffer from a neurological disease is a painful journey. It can also be agonizingly frustrating as a once proud and independent person succumbs to physical and mental ailments.
Voyager Therapeutics (NASDAQ:VYGR) aims to put an end to this scourge, and I give them all my blessings. Utilizing a common, naturally occurring virus called adeno-associated virus (AAV) as a “treatment carrier,” VYGR scientists propose to target diseased cells for repair. A significant advantage for using AAVs is their long lifespans. A single dose could potentially lead to lifelong benefits.
The technology is very promising but VYGR is still relatively in the early phase. Naturally, Voyager’s financials aren’t the greatest, and its share price is volatile. However, if the company manages a breakthrough, we will witness a paradigm shift in how we approach ailments such as Parkinson’s disease.
Furthermore, gene therapy holds the key for solving a multitude of other diseases. VYGR is among a few high-growth stocks that could spark a medical revolution. Young investors should carefully watch this space.
Kinross Gold (KGC)
Although regular readers probably know my work involving cryptocurrencies and cannabis, I’m also a believer in gold. At the risk of sounding like some 2 a.m. infomercial — not that I know what those sound like — a healthy portfolio should include some physical precious metals, or at least SPDR Gold Shares (NYSEARCA:GLD).
But for those who want to take a little bit of risk, I’d look into Kinross Gold (NYSE:KGC). As with many other high-growth stocks in the gold sector, KGC has a shaky history. Primarily, Kinross made expensive acquisitions at or near the gold bubble earlier this decade. Investors subsequently punished KGC stock.
However, the industry buckled down into the new reality of deflated gold prices, and Kinross was no exception. But with shares taking a beating since August, I think the negativity is overplayed. For starters, KGC met its second-quarter 2018 earnings target and reiterated its year-long outlook. Moreover, the company has several mining projects that will go online over the next few years.
It’s not a perfect story, but young investors have the time to wait out KGC stock.
Mitsubishi Heavy Industries (MHVYF)
I’m going to close my list of high-growth stocks with another contrarian play, Mitsubishi Heavy Industries (OTCMKTS:MHVYF) — a core company of the Mitsubishi Group. With most Asian investments focusing on Chinese companies, it’s easy to forget about Japan. However, I think this is a misstep that young investors should capitalize on, and MHVYF is ideal for this purpose.
Let’s pick the low-hanging fruit first. MHVYF is a renowned manufacturer of mining and industrial equipment. Although purely conjecture, Mitsubishi could play a significant role in Japan becoming a natural-resource exporter. According to CNBC, Japanese researchers found a “semi-infinite” amount of rare earth metals off Minamitorishima Island.
Before you get too excited, the critical metals were discovered in the deep-sea bed, so currently, it’s not economically feasible to extract them. However, where there’s a will there’s a way, and Mitsubishi could play a significant role. If so, this could launch MHVYF.
Another trend working in Mitsubishi’s favor is military conflict. With unpredictable North Korea mere miles away, Japan needs to beef up its defenses. I’m not talking about another war, but rather, a show of force to dissuade enemy attacks and provocations. Mitsubishi is one of Japan’s major military contractors, and all geopolitical events point towards a rising MHVYF share price.
As of this writing, Josh Enomoto is long gold bullion.