Last year provided a wild ride for investors of all types. For those heavily invested in hyper growth stocks, it was certainly a year to remember. The Russell 1000 Hyper Growth Index returned 29% for the year, with volatility at 15.7%, compared to its sister Russell 1000 Index, at a return of 26.5% and volatility of 13.4%, according to FTSE Russell data.
The pandemic ebbed and flowed, with a late-year surge of the omicron variant driving significant uncertainty in the market. Additionally, inflation has reared its ugly head, surging to levels not seen in 40 years. Accordingly, the Federal Reserve has begun taking an overly hawkish view of inflation, driving expectations that interest rates could rise as many as four times this year.
For hyper growth stocks, this is not a good thing. Companies that have a significant percentage of their future earnings coming further down the line are required to discount those earnings to the present day. The higher the interest rate, the higher the discount rate, and therefore the lower the valuation investors can place on those future earnings.
However, there are some companies that may fit the bill for a melt-up this quarter. Whether it’s existing revenue growth strength, or the potential for massive earnings beats this quarter, these companies appear to have what it takes to continue to benefit from a buy-the-dip mentality in the markets.
Yes, risks are elevated right now. However, for investors looking for growth stocks to buy at a discount, here are seven top options to consider on any meaningful pullback from here.
- CrowdStrike (NASDAQ:CRWD)
- Nucor (NYSE:NUE)
- The Trade Desk (NASDAQ:TTD)
- Nvidia (NASDAQ:NVDA)
- Shopify (NYSE:SHOP)
- Microsoft (NASDAQ:MSFT)
- Confluent (NASDAQ:CFLT)
Hyper-Growth Stocks to Buy: CrowdStrike (CRWD)
Perhaps one of the most perplexing hyper-growth stocks of late has been CrowdStrike. Amid a year filled with cybersecurity attacks, and increased demand for cloud security services, CRWD stock’s valuation has dipped. Over the past 12 months, this stock is down more than 22% while that Russell Hyper Growth gauge is up 20.7%. For those bullish on enterprise cloud security solutions, this performance can be a head-scratcher.
Of course, like the other companies on this list, CrowdStrike’s valuation is rich. Accordingly, the company’s 73% year-over-year growth in subscriptions this past quarter hasn’t seemed to be enough, in the face of rising interest rates.
However, the company’s more depressed valuation could provide fuel for a resurgence in this tech stock, should the winds in the market change. This is a company with strong existing fundamentals, making it a prime buy-the-dip candidate.
Additionally, I’m watching CrowdStrike’s upcoming product launches as another key catalyst for this stock. The company is launching Falcon and SentinelOne, two products which could bolster the company’s market share in zero-trust security adoption and cloud migration.
One of the best performers on this list is Nucor. This basic materials stock has approximately doubled over the past year, posting incredible performance relative to 2020. As commodities continue to surge, this otherwise boring materials stock may certainly be included among other top growth stocks, considering the pace of growth this company has seen of late.
Revenue growth of 109% and bottom line outperformance this past quarter indicates just how strong the underlying fundamentals are for Nucor. This isn’t some small company either. Nucor brought in $8.79 billion in the third quarter and is estimating $10.45 billion in Q4. That would be good for a 473% increase on a year-over-year basis. Thus, it’s unsurprising to see the market pricing in this higher growth.
However, I’ve expected to see Nucor’s valuation multiple increase from current levels. If anything, the company’s trading at an extreme value multiple, relative to its peers. At less than 7-times earnings, there’s a lot to like about how NUE stock is positioned right now. Thus, this is a company I think value and growth investors alike should consider right now.
Hyper-Growth Stocks to Buy: The Trade Desk (TTD)
Perhaps a more true “hyper growth stock,” The Trade Desk is a true beneficiary of some of the longer-term trends we’ve seen play out. This company’s self-service cloud platform allows for digital advertising campaigns to be fully managed by buyers. The use of artificial intelligence technology and proprietary cloud computing data centers allows The Trade Desk to offer other value-added services as well.
This ad-buying platform has shown impressive growth in the recent past. Over the past four years, The Trade Desk’s revenue has grown 300%. According to the company’s most recent quarterly report, TTD brought in $215 million in cash from operations. On the top line, revenue grew by 40% on a year-over-year basis.
Accordingly, The Trade Desk is a company in a fast-growing segment, with a tremendous growth trajectory. Customers like the platform, and all indications are growth should continue. Of course, the company’s $37 billion valuation is steep, when considering how much cash the company is generating today. Accordingly, higher interest rates matter for this stock.
That said, if growth picks up, TTD stock is one that could melt up this quarter.
One of the fastest-growing stocks in 2021, Nvidia has become a hyper-growth stock everyone wants to own.
Well, this semiconductor player produces high-end chips aimed at key growth sectors. Among the sectors Nvidia powers are artificial intelligence, gaming, the metaverse, and even crypto mining. These red-hot sectors all melted up at various points in 2021. Accordingly, there continue to be a significant number of NVDA stock investors and traders who think the same is possible this year.
Now, just because something took place before doesn’t mean it will happen again. However, all indications are that Nvidia is a company moving in the right direction.
This chip maker saw its revenue increase by more than 50% over the past five quarters. Additionally, with the GPU market expected to grow at a 14% annualized clip for the next four years, there’s certainly a lot of run way for NVDA stock to continue to grow along its current trajectory.
Hyper-Growth Stocks to Buy: Shopify (SHOP)
Perhaps one of the fastest-growing Canadian stocks ever, Shopify has blown away growth expectations for quite some time. Now, the company did post its first ever quarterly earnings miss since going public. However, Shopify’s ability to consistently pole vault over expectations that grew to astronomical levels is noteworthy for investors.
Shopify provides a fully integrated platform for small and medium sized businesses to transition to an online store. Given the realities the pandemic provided, this actually turned out to be an incredible tailwind for Shopify. However, with a return to normal continuing to take hold, Shopify is seeing growth slowing down as of late.
Now, the question many investors have is whether this recent top line growth rate will continue slowing, or re-accelerate higher with the rise of the omicron variant. I think there’s a decent likelihood the latter situation plays out. Accordingly, investors looking for a hyper-growth stock with impressive upside potential in Q1 may want to consider SHOP stock.
No list of hyper growth stocks is really complete without talking about Microsoft, particularly in the wake of yesterday’s massive acquisition announcement of Activision Blizzard (NASDAQ:ATVI), in a deal worth more than $68 billion. This deal, should it be completed, would be Microsoft’s biggest ever, and mark an aggressive move to dominate the gaming space. For many long-term investors, there’s a lot to like about this move.
Of course, given the premium Microsoft is looking to pay to get this deal done, MSFT stock is down on the news. However, zooming out, there’s a tremendous amount to like about the company’s growth trajectory.
Over the past five years, this stock has been a five-bagger, absolutely skyrocketing despite concerns about the company’s valuation. Microsoft has assuaged these concerns with higher growth rates, mainly from the company’s cloud and gaming divisions.
This deal could be a key catalyst for investors looking for melt-up plays in Q1. Accordingly, I’ve got MSFT stock on my watch list right now.
Hyper-Growth Stocks to Buy: Confluent (CFLT)
Finally, we have data streaming platform Confluent. This company had its initial public offering (IPO) in the summer of 2021. At that time, Confluent managed to raise $828 million in growth capital, and CFLT stock continued higher since its IPO, now trading at a premium of more than 70% to its IPO price.
Now, this performance is notable for two reasons. First, most IPOs from mid to late-2021 did not perform as well. Disappointments highlighted last month by Morningstar data journalist Margaret Giles include Coinbase Global (NASDAQ:COIN), up only 2% in the eight months following its April 14 IPO. Confluent’s business model is one that the market seems to accept as having excellent growth potential.
Second, the company’s focus on real-time data feeds and the cloud sector makes for a compelling investing thesis for many long-term investors. Despite the gyrations of the overall market, Confluent is a project that’s worth keeping an eye on.
This company is not yet profitable, and a significant chunk of its future cash flows may come much further down the road than many investors may otherwise like in this current environment. However, should the company’s growth rate accelerate, anything’s possible with this stock.
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.