Investing in growth stocks is a safe play for many investors, especially in a turbulent market. Companies that fall into the category offer an innovative product or service and often outperform the market. These stocks appreciate in value over time and offer incredible returns. Taking into account the benefits of compound interest, they are a worthy investment for the long haul.
However, given the level of uncertainty in 2020, some under-the-radar stocks now show great growth potential. These companies are well-positioned to deliver massive gains and often come at a lower price tag than traditional growth stocks.
If you are looking to make some long-term plays as we head into 2021, here are my top picks.
- Tencent Holdings (OTCMKTS:TCEHNY)
- HubSpot (NYSE:HUBS)
- Freshpet (NASDAQ:FRPT)
- Twilio (NYSE:TWLO)
- Bandwidth (NASDAQ:BAND)
- SunOpta (NASDAQ:STKL)
- Afterpay (OTCMKTS:AFPTY)
Growth Stocks: Tencent Holdings (TCEHNY)
Chinese tech giant Tencent had a great year and few companies are a better buy at this moment. The company’s growth was put on hold in 2018 after it came under scrutiny over regulatory concerns. But it has navigated the political spectrum with ease and is on the path to greater growth.
Tencent offers a number of different services but is most noted for owning WeChat. The social platform boasts a userbase of 1.2 billion.
Even during a turbulent year, Tencent has managed to maintain its growth levels. In its most recent quarter, the company reported a 25% increase in revenue to $10.5 billion. Profit for the period also increased by 85%.
Given that Tencent is a powerful player in a high-growth e-commerce industry, it’s safe to say that the company has a greater upside ahead. This is a growth stock that’s worth your time.
HubSpot is a leader in the world of digital marketing software but is often overshadowed by bigger names in the industry. This is because the company’s tools usually cater to small- to mid-sized businesses.
2020 proved to be an important year for HubSpot as they played a critical role in helping small businesses impacted by the pandemic. This allowed the digital marketing company to remain resilient in the face of a corona-economy.
The performance was reflected in its third-quarter earnings. HubSpot was able to beat analysts’ revenue and earnings estimates even in a slow year. Subscription revenue for the period spiked by 32% while the customer base grew by 39%. Earnings also increased by an impressive 7.8%.
The overall growth this year pushed the growth stock up by 145% in 2020. As more businesses grow their digital footprint, HubSpot will benefit from a massive boost in sales growth.
Organic pet food is a growing industry and one of the leaders in this space is Freshpet. Unlike traditional pet food, the company is focusing its efforts on a new niche: refrigerated pet food. This means that the food is fresher in contrast to pet food in bags which often includes preservatives. This short shelf-life also means healthier foods for your pets.
Freshpet has a lot of room to grow in the coming years. Research shows that expenditure on pets is on the rise. In 2020, nearly $99 billion will be spent on pets with $36.9 billion of that going towards pet food. Moreover, pet owners are also willing to spend more on pet food, especially if it is more nutritious.
Freshpet may be an “under-dog” business, but the growth stock shows some strong potential.
Twilio, the customer engagement platform, has shown incredible resilience in the corona-economy. Just this year, the company’s stock has skyrocketed by an impressive 219% and shows signs of even greater growth in the future.
This rise was fueled by an impressive third quarter. Twilio reported a 52% increase in revenue and a 37% rise in customer spending on its tools. Earnings per share also saw a surprise profit of 4 cents per share compared to last year’s loss of 5 cents per share.
Twilio has big plans to expand its services in the next few years. Recently the company announced that it will acquire Segment, which focuses on collecting customer information from various sources. The deal will be worth approximately $3.2 billion.
The customer data will help Twilio create products that are better tailored to its customer’s needs. Given its exceptional performance this year and signs of better days ahead, Twilio is one of the best growth stocks on the market.
Bandwidth had a slow growth in the last couple of years but the remote economy has done wonders for its stock price. The company is a communication platform as a service (cPaaS), similar to companies like Zoom (NASDAQ:ZOOM) and Twilio.
After seeing slow growth for the last few years, the remote work environment breathed some new life into the growth stock. The company expects its momentum to continue.
Although Bandwidth operates in the same space as Zoom, it actually counts the company as a customer. The company offers applications tor communication platforms with messaging and embed voice among others. This has led Bandwidth to a record triple-digit surge in its stock this year.
Total revenue in 2020 is also up 40.1% from 2019. The company is still much smaller than its competitors in terms of market cap, but has a lot of room to grow. If you are looking for an underdog in the communications space, this is one of the best stocks to buy.
Canada-based SunOpta is reinventing the organic food scene. The brand focuses on sourcing sustainable ingredients for its plant-based and fruit-based foods and beverages.
2020 has been a year of growth for the company as more people look to eat healthy and boost their immunity levels. This demand translated to a 217% increase in SunOpta’s price this year and its EBITDA in Q2 also doubled year-over-year.
SunOpta is an important name in the emerging healthy food scene. The brand also has a presence in over eight countries with more expansion plans ahead. Industry analysts estimate that the stock’s momentum will continue into the next year as well.
The company’s emphasis on healthy foods and sustainable production practices will propel this growth stock to new highs. SunOpta stock is a great play in the food and beverage scene.
Afterpay is a leader in the payment space and a pioneer in the buy now pay later (BNPL) technology. After going public in 2017, the growth stock is up by 217% since January.
Despite these gains, the fintech platform still has a large runway for growth. In addition to its innovative platform, Afterpay also has a strong consumer brand. The company’s current default rate on bad credit is less than 1%. Its technology also integrated with most major brands in the retail space.
Looking ahead, Afterpay expects to add more services to its core offering. The company announced that it will introduce cash flow tools and savings accounts through a partnership with Westpac Banking Corp. This hints at greater growth levels for the stock in the coming years.
Afterpay is off to a good start. In the first quarter of FY2021, the company recorded a 115% increase in sales. If you are looking for a strong growth play in the next year, Afterpay stock is a safe bet.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.