7 Growth Stocks to Buy to Make Early Retirement a Reality
Growth stocks have done well in 2021. Despite having a tepid few months, momentum is returning for two main reasons. First, reopening plays are slowing down. Second, concerns about a flare-up in Covid-19 cases are hindering economic growth.
As such, investors are now looking toward growth stocks to power their portfolios. But before we take a deep dive into these seven prominent names, we should understand what constitutes a growth stock.
Essentially, these picks generate substantial and sustainable positive cash flow and their revenues and earnings are expected to increase faster than the industry average. However, they tend to be riskier than other stocks because their higher growth rate amplifies the chance of a larger drop if earnings don’t match expectations. So, when you are picking growth stocks for retirement, you should really invest in companies with tangible growth stories and track records of some success.
Now that we have that out of the way, though, let’s discuss these seven names that have made waves in the past and have excellent growth prospects ahead:
- McDonald’s (NYSE:MCD)
- Starbucks (NASDAQ:SBUX)
- ABB (NYSE:ABB)
- Gartner (NYSE:IT)
- DocuSign (NASDAQ:DOCU)
- Capital One (NYSE:COF)
- Palantir (NYSE:PLTR)
Growth Stocks to Buy: McDonald’s (MCD)
First up on our list of growth stocks is MCD stock. McDonald’s revolutionized the restaurant industry with low-cost and quick-to-prepare menu options. It is also the largest restaurant owner-operator worldwide, with some 39,000 stores across 119 countries.
Overall, last year wasn’t too bad for this globally famous brand. Due to its increased focus on drive-thru, delivery and takeaway services, McDonald’s managed to escape last year without substantial damage. MCD recorded a net income of approximately $4.73 billion in 2020, a decrease from the previous year’s figure of around $6.03 billion. For 2020, McDonald’s also generated $19.21 billion in revenue.
However, this fast-food giant has recovered nicely if first-quarter earnings are any indicator. In Q1, McDonald’s reported net income of $1.54 billion, or $2.05 per share. That was up from $1.11 billion, or $1.47 per share, a year earlier.
On top of that, net sales jumped 9% to $5.12 billion, beating expectations of $5.03 billion. Global same-store sales rose 7.5% in the quarter as well. Finally, McDonald’s “raised its systemwide sales outlook for 2021 from growth in the low double digits to the mid-teens.”
And if you’re still unconvinced, the fast-food giant just reported stellar Q2 results on Jul. 28, too. The results saw an earnings beat, among other pluses.
Starbucks is a world-famous coffeehouse chain that operates over 32,000 stores across more than 75 countries. Apart from its retail locations, SBUX generates revenues through licensed stores, consumer packaged goods and foodservice operations. It also sells packaged coffee and tea products to grocery stores, warehouse clubs and specialty retail stores.
The company has reported better-than-expected earnings in each of the last four quarters, while revenues beat consensus for two of the last four quarters.
How has Starbucks been able to establish such a dominant position in the market? Well, it has been increasing its global market share by opening stores in new and existing markets and remodeling older locations. Let’s not forget that frequent additions to its menu have also helped the bottom line.
Lastly, Starbucks is also geographically diversified, with China and the Asia-Pacific regions becoming one of its fastest-growing segments. Additionally, this coffeehouse giant has a business relationship with Chinese e-commerce giant Alibaba (NYSE:BABA) to integrate multiple platforms across both companies’ ecosystems.
All in all, SBUX stock is a standout name when it comes to growth stocks.
Growth Stocks to Buy: ABB (ABB)
Next up on this list of growth stocks is ABB stock. Based in Zurich, Switzerland, ABB specializes in making robots that are used in industrial plants and manufacturing. Moreover, ABB has been in the news recently because it plans to float its fast-growing electric vehicle (EV) charging business next year.
Sales of its high-speed EV chargers for buses and cars have grown at an average of 50% since 2016, helped by the general shift towards battery-powered vehicles. CEO Bjorn Rosengren believes the listing could occur early next year.
“Demand is enormous and we don’t expect it to go down,” Rosengren said. According to Reuters, Rosengren also added “that orders had more than doubled in the first half of 2021.” The potential initial pubic offering (IPO) is seen as the latest step in Rosengren’s reorganization efforts.
In terms of reorganization, the CEO has also mentioned plans regarding the sale of ABB’s clutch and transmission business, as well as the companies turbocharging business. The latter could be spun off in Q2 of 2022.
ABB made these announcements alongside its Q2 2021 earnings. In the results, the company reported 21% year-over-year (YOY) revenue growth, reaching $7.45 billion and beating estimates of $7.24 billion. Net profit also jumped 136% to $752 million. The company “now expects full-year comparable revenues to rise by just below 10%, above its previous view for a 5% increase.” Lastly, ABB recently stated that it’s building a new factory in Shanghai to manufacture its various robots.
Gartner delivers technology-related insights for critical business decisions. Essentially, this global research and advisory firm counsels companies in the information, finance, HR, communications, legal and compliance, marketing and sales spheres.
To be sure, data and data analysis is a driving force for future business progress and success. Therefore, IT stock is a very attractive long-term play among growth stocks, especially for people interested in the analytics theme.
Last year, we saw a blockbuster deal between S&P Global (NYSE:SPGI) and IHS Markit (NYSE:INFO) worth $44 billion. That is the value of market insight and data right there. And on its own part, Gartner has been doing quite well for itself, surpassing Wall Street expectations for several quarters.
More specifically, Gartner has recorded better-than-expected earnings performance since Q1 2019. In its most recent earnings report, the company also raised its full-year 2021 guidance. It now expects total revenues to be $4.51 billion compared with the prior outlook of $4.37 billion.
Growth Stocks to Buy: DocuSign (DOCU)
Next up on this list of growth stocks is DOCU stock. DocuSign allows organizations to manage electronic agreements through its cloud-based technology. Clients can utilize the platform either through a subscription or a free-of-charge mobile device app.
Unsurprisingly, DocuSign saw a massive surge in usage during the novel coronavirus pandemic. Due to the nature of this crisis, a significant chunk of companies shifted to the cloud so that they could execute their daily work digitally. Now, the spread of the super-contagious Delta variant has prompted fresh concerns that we may be in for more trouble in the near future.
Regardless, the move to the cloud is a secular trend. Yes, certain events like Covid-19 can intensify our shift. But we’ve been talking about the paperless office for decades — literally.
DocuSign has made itself an important part of this change by creating an ecosystem that facilitates complete contract lifecycle management. Its offerings will ensure that this firm sustains momentum moving forward.
Capital One (COF)
Bank stocks took a beating in 2020, with commercial banks suffering due to a depressed economic environment and the accumulation of allowance reserves. However, we have since seen a great turnaround for the wider industry and Capital One due to a reduction in reserves.
This bank’s credit metrics remained stable throughout the pandemic, but they have only gotten healthier in 2021. Most people expected an uptick in charge-off and delinquency rates when stimulus support ended. However, Capital One continues to show healthy growth rates.
For example, Capital One’s Q2 adjusted earnings beat the average analyst estimate, recording a $1.16 billion benefit due to consumers’ robust credit performance. Additionally, revenue came in at $7.37 billion, versus $7.11 billion in Q1 and $6.56 billion in Q2 2020.
Overall, Capital One has bounced back exceptionally from 2020 due to the overall economic recovery. The bank has reduced reserve build, leading to a boost in net income. Now, it seems like the trend will continue for the rest of 2021, making COF stock an attractive pick among growth stocks.
Growth Stocks to Buy: Palantir (PLTR)
Last up on this list of growth stocks, Palantir specializes in big data analytics. Founded in 2003, it has also transformed into a pretty formidable company in the public sector analytics space.
Since debuting last September, Palantir has hardly put a foot wrong. The company has inked a plethora of new contracts (InvestorPlace’s Alex Sirois also did an excellent job shedding light on the recent ones).
The only thing that could potentially go against PLTR now is regulatory activity. Essentially, this company provides mission-critical software to several government agencies and enjoys an excellent relationship with them. But there are aspects of its business model that are controversial. For example, Palantir provides software to the U.S. Immigration and Customs Enforcement (ICE).
These kinds of contracts annoyed several Congress members, including New York Rep. Alexandria Ocasio-Cortez, who asked the U.S. Securities and Exchange Commission (SEC) to probe the data firm before it went public.
That said, defense is a bipartisan issue. Even though some lawmakers have different ideas on national security, if Palantir ultimately secures the safety of American citizens, it should continue to gain contracts. This makes PLTR stock an ideal long-term name for your portfolio.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.