For investors in high-growth stocks, the past few weeks have certainly not been great. The U.S. inflation rate hit its highest level in four decades. In December itself, the inflation rate rose to 7%. It is expected that from March 2022, the Federal Reserve system will raise interest rates three or more times to curb rising prices.
For growth stocks, that’s really not a good thing.
Rising interest rates by definition increase the discount rate used to value stocks. For companies with a greater proportion of their earnings coming from years out in the future, discounting those earnings back to present day provides a much smaller value using a higher discount rate. Accordingly, growth stocks are often the most sensitive to rising rates.
Of course, investors looking at this situation can do so in one of two ways. Investors can choose to simply rotate out of growth stocks, into more defensive sectors. Or, investors can look at high-growth stocks that may be undervalued via this short-term narrative and load up.
For those closer to the latter end of the spectrum, here are seven top high growth stocks to consider right now. These companies each have compelling reasons to hold or add at these levels.
Let’s dive in.
- Nvidia (NASDAQ: NVDA)
- Amazon (NASDAQ: AMZN)
- Disney (NYSE: DIS)
- Advanced Micro Devices (NASDAQ: AMD)
- Upstart (NASDAQ: UPST)
- Alphabet (NASDAQ: GOOG)
- PayPal (NASDAQ: PYPL)
Top High Growth Stocks: Nvidia (NVDA)
When looking for long-term growth stocks to hold, searching for quality is a good starting point. For investors in Nvidia, it’s hard to argue that this semiconductor manufacturer is anything but top-notch.
Shares of NVDA stock have been on an absolute tear in recent years, surging to what many believe was a far too aggressive valuation. However, investors who have wanted to buy Nvidia on the way up now have a meaningful pullback to do so on. The question many have is whether this stock is simply cheap enough at these levels.
Currently, Nvidia is a company with a market capitalization of $580 billion, trading at around 70-times earnings. For most companies, that’s far from cheap. However, for Nvidia, this sort of valuation multiple hasn’t been seen in some time.
That’s because the growth that’s expected in the semiconductor space remains high. There’s a chip shortage right now, and burgeoning demand for chips from key growth sectors such as AI, gaming, the metaverse, and of course crypto. These red-hot sectors are continuing to see adoption, despite the falling share prices of many companies operating in these sectors.
Thus, for those who are taking a truly long-term view of these secular growth catalysts, Nvidia certainly looks attractive on this recent pullback.
What’s a list of high growth stocks without Amazon?
Perhaps the king of growth stocks, this e-commerce juggernaut ought to be on every investor’s watch list, if not already in their portfolio.
Amazon is a world-class company, with not only an industry-leading e-commerce platform but a strong and growing cloud business as well as a growing presence in the physical retail space as well.
Of late, Amazon’s stock has waned, due mainly to this rising rate environment. However, investors looking at Amazon over the long-term may like this 25% pullback from the company’s recent all-time highs.
The market cap of the U.S. digital ad market is supposed to reach $270 billion by 2023. In this fast-growing market, analysts have predicted that the shares of Facebook and Google will decline while those of Amazon will rise.
Amazon is attracting more third-party merchants by offering higher returns on advertisements than the other two giants. Furthermore, the two factors that caused an economic setback for this company, a shortage of labor and supply-chain issues, are believed to be resolved in 2022.
There are many reasons to be long Amazon. However, the question is whether investors have the guts to buy it when it’s down.
Top High Growth Stocks: Disney (DIS)
Another world-class growth company, Disney is a stock that deserves to be on every investor’s radar.
This company’s performance has been best exemplified by how the media and entertainment conglomerate handled the pandemic. Disney showed consistent and promising growth before 2020. But as Disney’s theme parks closed, this stock became the worst-performing growth stock.
However, since then, Disney has made some incredible steps. The company shifted its focus to its Disney+ streaming platform.
Online sales of merchandise and other non-parks revenue helped bridge the pandemic-driven gap, while pent-up demand caused a surge in profitability once parks reopened. All in all, the pandemic proved the vibrance and resiliency of the Disney brand.
Weak subscriber growth from streaming rival Netflix has also hit DIS stock hard of late. However, this company’s results have not yet come out, suggesting the potential for an asymmetric near-term return.
Over the long-run, I like this stock. However, DIS stock happens to have near-, medium- and long-term catalysts I think are worth considering. Accordingly, investors looking for growth stocks may want to consider Disney on this recent dip.
Advanced Micro Devices (AMD)
Another chipmaker on the list is Nvidia’s top rival. Despite various obstacles in the larger market, the value of AMD rose by almost 50% in 2021.
In November, this cap maker also hit a record high of $164.46. However, since then, AMD shares have lost nearly 28%. However, thanks to several catalysts, this semiconductor company looks to have a lot of upside moving forward.
Indeed, this optimism is best-exemplified by AMD’s recent third-quarter earnings. The company posted year-over-year revenue growth of 54%, to $4.3 billion. Additionally, guidance for Q4 was provided for revenue of $4.5 billion, which would represent a 39% year-over-year increase.
Those are monster numbers. Of course, analysts and most investors remain bullish on this stock. However, any stock that loses more than a quarter of its value in the face of this strong growth is one investors may want to consider.
It’s easy to buy stocks when they’re going up – however, when there’s a sale is when truly long-term investors should get excited.
Top High Growth Stocks: Upstart (UPST)
Perhaps the tech stock that’s been clobbered the hardest by this rising rate environment is Upstart.
Indeed, Upstart’s valuation was perhaps the most unreasonable of this group to begin with. When one considers the fact that UPST stock has lost more than three-quarters of its value, and it’s still priced at more than 90-times earnings, it’s not a cheap stock by any stretch.
That said, this valuation multiple is one that investors can now fathom. Upstart is an AI-powered platform that allows lenders to better assess the creditworthiness of borrowers.
Using a number of factors outside of the traditional credit scoring system, Upstart allows for not only more borrowers to be approved for loans (good for lenders) but provides lenders with a more accurate picture of the real ability for borrowers to repay their loans (also a huge positive).
This company’s growth rate of 250% on the top line is impressive, and Upstart is now profitable. Indeed, for investors seeking a more aggressive growth option at a much more reasonable price, this is certainly a top pick of mine to consider right now.
Another top-tier blue-chip growth stock investors may want to watch during this turmoil is Alphabet.
The Google parent is not only a higher-growth stock than your average company, but it’s also among the most stable. Much of that has to do with this company’s business model.
As the global leader in search and online advertising, Alphabet is an absolute behemoth. This company’s margins make most competitors blush, and this company simply prints cash.
In recent years, GOOG stock has run in incredible fashion, leading many to believe this stock was due for a pullback. Of course, investors waiting for a decent pullback before jumping in now have their wish. GOOG stock is now approximately 15% off its all-time high.
Those looking for quality growth stocks must consider Alphabet a top pick right now. There are few better companies to go with over a 10- to 20-year long holding period. At least, that’s my view on this world-class stock.
Finally, we have fintech company PayPal to round out the list.
A company that’s often considered one of the fastest-growing technology companies in the finance sector, PayPal’s valuation is one that’s created some cognitive dissonance among investors in the past.
Like Upstart or other fast-growing companies, PayPal’s valuation may have gotten ahead of itself. Additionally, like Upstart, many investors may have wanted to buy this stock if it “only got a bit cheaper.”
Well, PYPL stock has indeed gotten cheaper. In fact, this stock is now trading at a discount of almost 50% to its 52-week high – that’s a real discount. For those looking for world-class fintech growth at a discount, this is a company to consider, particularly if interest rate-driven concerns drive valuations even lower.
PayPal’s perhaps ill-timed expansion into crypto is another key catalyst that’s driven this fintech stock lower. However, for those who believe blockchain innovation is here to stay, perhaps this dip is worth buying.
It’s too soon to tell how long the bleeding in growth stocks will continue. However, all of these companies have reasons why they’re down, and compelling reasons to buy at these levels. It’s up to individual investors to see if these stocks fit their risk profiles and if they’re just simply too attractive to ignore.
On the date of publication, Chris MacDonald 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.