The coronavirus, trade war, overall high stock valuations and other issues were supposed to make 2020 a great year for value stocks. After years of winning, growth stocks were no longer on the menu as investors switched to their dividend-paying/cheaper value cousins. Well, you can throw that out the window.
Growth stocks are once again back in charge.
So far this year, growth stocks have continued to outperform their value sisters. The iShares Russell 1000 Growth ETF (NYSEARCA:IWF) is up over 4% so far in 2020. This contrasts with the iShares Russell 1000 Value ETF (NYSEARCA:IWD), which is around even for the year. And the difference may continue.
With the trade war now behind us and the spread of the coronavirus starting to slow, the pump is primed for more growth gains ahead. In the end, its too early to count out growth stocks. They’re still going to be one of the major drivers of returns for the near future. And in that, investors still need to own them.
But which ones? Here are five growth stocks that have plenty of “oomph” behind them and could make a great addition to your portfolio.
Growth Stocks to Buy: Nvidia (NVDA)
About 41%. That’s how much Nvidia’s (NASDAQ:NVDA) year-over-year revenue surged in its latest quarter. That’s a massive jump and just goes to show that there is still plenty of the growth in NVDA’s tank. Where’s that growth coming from? A hefty does of data center and artificial intelligence demand.
NVDA has long been the graphics card/processor king. However, these days many of those chips aren’t going into computers to play the latest version of Quake. It turns out those chips are perfect for the rapid-fire computing power you need to make A.I. and data centers run efficiently. Without them, many cloud computing apps and other things we take for granted wouldn’t work.
This fact has sent many OEM’s right to Nvidia. Both CEO Jensen Huang and Colette Kress highlighted this fact on Nvidia’s conference call — with the firm’s performance driven by the rapid adoption of A.I. by data center customers. Data center sales grew by 33% alone in the last quarter.
The best part is that Nvidia still has plenty of growth potential ahead. With driverless cars, overall rising data center demand driven by natural language applications as well as interconnected technology all becoming big tech trends, its chips will undoubtedly be in big demand. No wonder analysts predict the firm would see a big 13% jump to its earnings each fiscal year for the next five years.
All in all, Nvidia could be one of the best growth stocks around — both now and far into the future.
With a seemingly endless supply of new digital channels and networks offering streaming packages, only one firm really lets you watch them all via one device. And that’s ROKU. Thanks to its open source OS that’s found on its own devices and now many TV’s as the standard, ROKU has become the platform play for all streaming channels. Over 5,000 in fact. Consumers can watch Hulu, their Disney+ and Netflix (NASDAQ:NFLX) subscriptions all from the same device.
This has made ROKU a powerhouse of growth.
During its last quarter, total revenues at Roku jump grew 52% year-over-year to $1.13 billion. However, the real win for the firm has continued to be its “platform” revenues. This includes selling ads on its Roku channel as well as “click-through” fees when users buy subscriptions to other channels via its devices. Here, revenues jumped by more than 78% during the quarter.
The best part is that despite being the streaming champion, there are still plenty of households left when it comes to cord cutting. And there’s a real good chance they’ll choose a Roku device.
All in all, ROKU has the growth potential to keep its revenues moving higher for the long haul.
Boston Scientific (BSX)
Aside from tech, the healthcare sector is full of growth stocks that offer years worth of capital gains and potential. A top contender could be Boston Scientific (NYSE:BSX).
BSX stock’s main bailiwick are products designed to improve heart health. The firm is famous for its stents used in a variety of bypass and other cardiac-related surgeries. However, the firm’s pipeline is now vast and covers a variety of rhythm management, urology, oncology and neuromodulation products. This has made the medical firm a giant.
For full year 2019 earnings, Boston Scientific managed to pull in $10.73 billion in sales. That’s a decent 9.3% jump over last year’s numbers. On an GAAP EPS basis, that’s roughly triple what it pulled in over all of 2018.
And there’s a great chance that these gains will continue.
While Boston Scientific has warned on the coronavirus impacting its results in the short-term as a hefty amount of sales do come from overseas, the longer term is rosy. That comes down to its pipeline of new devices. Recently, BSX received approval for its new Exalt Model D Duodenoscope. Every year over 1.5 million endoscopic retrograde cholangiopancreatography (ERCP) procedures are done every year. As the one approved single use device of this procedure, BSX has a blockbuster on its hands.
With the pipeline growth counteracting any short-term corona virus weakness, BSX has a long runway for continued growth.
Beyond Meat (BYND)
I am in no way saying you should take a second mortgage on you house to buy Beyond Meat (NASDAQ:BYND), but you can’t deny the firm’s growth potential at this point. The maker of plant-based meat substitutes has continued to rack up sales and interest from consumers. Driving that has not been on the grocery store shelves, but via its massive partnerships with casual dining and quick-service restaurants. It’s recent partnership with Yum! Brands (NYSE:YUM) KFC to sell meatless fried chicken is a prime example of that. And it turns that has been a success.
With demand for plant-based options growing and an eye on China, it may finally be worthy of its parabolic share price.
Fellow InvestorPlace contributor Tezcan Gecgil highlighted BYND’s performance during the last quarter — with both restaurant and direct-to-consumer sales jumping. This led to the firm’s better-than-expected revenue announcement. With the firm set to report again at the end of February, the results should be equally as impressive. This is especially true now that many of its fast-food deals are starting to be in place and consumer demand has risen.
At the same time, the stock is still about 50% below its all-time high reached last summer. While valuation for Beyond Meat stock is still pretty expensive, that dip makes an interesting buy point. It’s a risky play, but given its growth trajectory and the continued surge in plant-based foods, its worth some capital in a portfolio.
Five Below (FIVE)
Retail is a bloodbath these days as the sector continues to split into the haves and have nots. For the haves, there can be plenty of growth stock potential — and leading the way could be Five Below (NASDAQ:FIVE).
FIVE is considered a dollar store. The kicker is that it’s not targeting adults, but their kids. It sells a variety of toys, candy, health & beauty items, fashion and gadgets — all the stuff seven-to-fourteen-year-old kids just can’t get enough of. The best part, as its name implies, is that everything is a Lincoln or less.
It turns out this niche is amazing. Over the last five years, the retailer has managed to produce annual compound sales growth of 24%. Meanwhile, its new locations take just one year to pay back their initial start-up costs.
Part of this high sales growth comes from Five Below generally targeting more affluent areas to build its stores. It’s not shooting for necessarily the same demographic as a Dollar General (NYSDE:DG).
And things could get better for Five Below over the next few years. The firm keeps opening new stores in great locations as well as new “Ten Below” zones in several of its more affluent stores. These locations will feature slightly more expensive gear that would cover iPhone, gaming, Bluetooth speakers and similar gadgets. Perhaps the best growth driver continues to new deals with firms like Disney (NYSE:DIS) to offer exclusive products branded with characters from Star Wars, Marvel and Frozen.
Over the long haul, Five Below’s niche will provide plenty of growth for its bottom line.
At the time of writing, Aaron Levitt was long FIVE and ROKU.