Due to fears surrounding the Delta variant, the China Evergrande issues and inflation, growth stocks are experiencing renewed interest.
Now you might be wondering as to why you should invest in growth stocks in the first place. Would it not be better to load up your portfolio with interesting value plays instead of opting for more complex growth plays? You could do that, but such a move would result in missing out on the explosive gains growth stocks can offer your portfolio.
The markets highly value consistently high sales and EPS growth. The good times cannot last forever, though, and growth will stabilize at some point. But before that, you can laugh all the way to the bank. That’s why dedicating a small part of your portfolio to growth stocks should be an important part of your investing strategy.
- Chipotle Mexican Grill (NYSE:CMG)
- Zoom Video Communications (NASDAQ:ZM)
- Ross Stores (NASDAQ:ROST)
- Amazon (NASDAQ:AMZN)
- Facebook (NASDAQ:FB)
- T-Mobile US (NASDAQ:TMUS)
- Carrier Global Corp. (NYSE:CARR)
Growth Stocks to Buy: Chipotle Mexican Grill (CMG)
Like other fast-food chains, Chipotle Mexican Grill did very well during the pandemic because of its focus on digital sales. With the pandemic somewhat behind us, restaurant sales are also returning in a big way for the burrito company.
In the fiscal second quarter, the company finished with a net income of $188 million, or $6.60 per share, up from $8.2 million, or 29 cents per share, in the year-ago period. Net sales jumped to $1.89 billion, representing year-on-year growth of 38.7%, handily surpassing analyst estimates of $1.88 billion. Last year, same-store sales plunged over 9%. This year, however, Chipotle Mexican Grill is firmly back in business, registering a growth of 31.2%.
However, the pièce de résistance of the earnings report is the digital sales numbers, which continue to impress investors and analysts alike. In the latest quarter, digital revenues increased 10.5%, representing 48.5% of total sales. Chipotle’s digital-only quesadillas, introduced in March, are one of the main reasons sales have been so strong lately.
Overall, it was yet another strong showing for Chipotle Mexican Grill. With this kind of performance, it is not surprising why investors value this stock highly. Looking ahead, the company is forecasting low-to-mid double digits sales growth during the second quarter. With that in mind, now is the right time to grab this one.
Zoom Video Communications (ZM)
Few companies benefitted from the pandemic like Zoom. With office life greatly disrupted due to the nature of Covid-19, businesses had to come up with unique ways to communicate with each other online. Zoom was one of the many solutions used to conduct meetings under the “new normal.”
As a result, usage skyrocketed, and massive profits followed. However, with a sizeable chunk of the U.S. population vaccinated, some analysts predicted the high growth days were a thing of the past. Nonetheless, the latest earnings report hammers home that ZM stock is here to stay as a tech juggernaut.
Zoom is thriving in a market that’s not. The company announced revenue has increased by 54% year over year, and they’re guiding for 31% growth next quarter, which will make the stock even more successful in the coming months. In the next quarter, Zoom expects adjusted earnings per share in the range of $1.07 to $1.08 and revenue between $1.015 billion and $1.020 billion.
Growth Stocks to Buy: Ross Stores (ROST)
The retail world has been in growth mode ever since the 2008 financial meltdown, and even though Ross Stores doesn’t do e-commerce as Amazon does, the company is still increasing. This is because of how much people love shopping at their stores, which has led to a five-year return of 73.0%.
The key reason for ROST stock’s success is that the company’s model relies on people wanting to go bargain hunting. The retailers rely heavily upon customers keen on looking around stores and perhaps unearth a hidden treasure at an affordable price and then buying several other unrelated items simply for being there. Unlike e-commerce giants, Ross Stores emphasizes the in-store experience instead of purchasing off their website.
Most recently, Ross Stores reported earnings per share of $1.39 on net income for the 13 weeks ended July 31st of $494 million, which represents year-on-year growth of 22%. Meanwhile, sales came in at $4.8 billion, with comparable-store revenue growing 15% compared to 2019. At the same time, Ross Stores gave the green light for a new program to buy back up to $1.5 billion of its outstanding share capital through fiscal 2022, with plans to repurchase $650 million this year and $850 million in 2022. Combining this with a dividend payout of 1.05% translates to a very healthy return on investment (ROI) for the average investor.
Amazon.com (AMZN)
Amazon is the gift that keeps on giving. With most of the world stuck at home last year, sales skyrocketed. However, momentum is slowing down due to reopenings. The latest earnings reinforce the narrative that the e-commerce giant is progressing at a decent pace. Amazon’s revenue grew by 27% year-over-year to $113.08 billion, which is unimpressive when compared to the second quarter of 2020 when revenue soared 41%. It plays into the narrative of reopenings. As people venture outside their homes, they are spending less time shopping online.
However, Amazon is ubiquitous in our world. Even though there can be a couple of tough quarters here and there, Amazon is a very stable enterprise with consistent performance over several years now. On top of that, it is always innovating and finding new ways to generate revenues.
A recent example is the electric vehicle startup Rivian, which has received substantial capital from Amazon. After injecting $700 million in 2019, the company has steadily built up its investment in the company. It is just one of the many examples of forward-thinking by the management, which should satisfy growth-seeking investors.
Growth Stocks to Buy: Facebook (FB)
During the last five years, shares of social media giant Facebook have gone up by 158%. It may seem hard to believe, considering Facebook has taken a lot of heat for how it handles its users’ private information.
When they first started their company, Zuckerberg and his friends were just college students who wanted to build a website to connect people worldwide. They never imagined what would happen as their platform grew exponentially in size and popularity, but issues pop up everywhere about how Facebook treats our data.
It seems like no one is happy with this site anymore – from advertisers to government officials – so we have to wonder: will Facebook continue its growth trajectory?
So far, the company has been able to walk a tightrope. Revenues are increasing at a healthy pace. And the social media giant is also working to ensure it behaves more responsibly. EPS and revenue have increased by 50.8% and 36.8% in the last five years respectively. Plus, much like other social media giants, Facebook is looking to address several issues that are sources of controversy.
Investors should also consider Facebook owns Instagram, Messenger, WhatsApp, and Oculus. That gives it a decent amount of diversification, which is something every investor covets highly.
T-Mobile U.S. (TMUS)
TMUS stock still feels like scorched earth. In August, T-Mobile announced that 40 million people’s personal information was compromised, including social security numbers, due to one of the biggest data breaches of all time. The company offers its customers two years of identity protection services and reminds them to update passwords as a standard precaution regularly. But the damage is already done.
Fast forward to October, and the company is still struggling to gain momentum. Nevertheless, the fundamentals are very good for the wireless network operator. According to CNBC data, the company has surpassed analyst estimates in the last 12 quarters consecutively. Most recently, in the second quarter, T-Mobile reported a gain of over 1 million subscribers, including 627 thousand new phone customers, handily beating forecasts of 873,000. Looking ahead, the company now expects full-year subscriber growth of 5.3 million, up from prior guidance of 4.9 million.
Undoubtedly, there will be certain investors that will remain on the sidelines despite this outstanding performance. But the fact remains that TMUS is a stable, mature performer who has done well for several years now. If you combine this consistent performance with shares trading at a discount, you have all the ingredients of an exceptional growth stock.
Growth Stocks to Buy: Carrier Global Corp. (CARR)
Carrier Global was formed in 1935 by brothers Donald and his son Richard, who were looking to improve the quality of HVAC equipment. Originally a family-owned company, it has grown to become an international enterprise with over 12,500 employees in around 100 countries worldwide.
Carrier Global is a $5 billion company that provides heating and cooling solutions to over 600,000 businesses. They are also the world’s number one provider of air conditioning systems used in commercial buildings around the globe, with operations spanning 75 countries.
Carrier’s second-quarter sales of $5.4 billion were up 37% compared to the prior year, and organic sales grew by 31%. GAAP operating profit in this period was $783 million, a 77% increase YoY, which is an impressive showing for any company. Carrier has been growing and expanding for many years. One way it’s done that is through mergers, such as the recent acquisition of a 70% stake in Guangdong Giwee Group, which gives the company an enviable foothold in the Chinese market.
On the publication date, 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 in 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.
