Growth stocks, which were the darlings of Wall Street in 2021, have been beaten down considerably since the beginning of 2022. The jittery market sentiment has been pushing the markets lower amidst rampant inflation, sky-high oil prices and geopolitical tensions. The Nasdaq 100 Index has plunged 12% year-to-date (YTD), while the S&P 500 is down 8% over the same period.
Economists are already debating whether the U.S. economy could be heading for a recession in the coming months. Although market participants understandably fear economic downturns, recessionary periods often create rare buying opportunities in the stock market.
Purchasing high-quality growth stocks during a recession could lead to steady returns. Seasoned investors currently see golden buying opportunities in such resilient stocks the are likely to do well even in a possible recession.
However, allocating a large part of a portfolio on growth stocks could come with increased volatility, especially in the short run. Therefore, it would be wiser for investors to build a balanced portfolio of reasonably priced growth and value names for diversification purposes.
With that information, here are seven growth stocks that could continue to deliver steady returns regardless of a possible recession.
- ASML (NASDAQ:ASML)
- Autodesk (NASDAQ:ADSK)
- Autozone (NYSE:AZO)
- Intel (NASDAQ:INTC)
- Nextera Energy (NYSE:NEE)
- Service Corporation International (NYSE:SCI)
- VanEck India Growth Leaders ETF (NYSEARCA:GLIN)
Growth Stocks to Buy: ASML (ASML)
52-week range: $536.01 – $895.93
Dividend Yield: 0.67%
ASML manufactures photolithography systems used by semiconductor foundries to produce chips. It commands over 60% of this niche market. Other chip heavyweights, such as Taiwan Semiconductor Manufacturing (NYSE:TSM), Samsung (OTCMKTS:SSNLF), and Intel (NASDAQ:INTC) use ASML’s products.
ASML released Q4 2021 results on Jan. 19. Net sales came in at 5 billion euros. Net income came in at 1.8 billion euros, or 4.39 euros per share, up from 1.7 billion euros in the prior quarter. Cash and equivalents ended the period at 7.6 billion euros.
With the metaverse becoming the next big buzzword in the chip industry, it will undoubtedly be the primary growth driver for the foreseeable future. Chipmakers increasingly rely on ASML’s machines to manufacture chips that will handle real-time processing of large amounts of data required to power the metaverse.
ASML stock hovers around $630, down 21% YTD. Shares are trading at 34.7 times forward earnings and 13 times trailing sales. The 12-month median price forecast for the stock stands at $925.
52 week range: $186.29 – $344.39
Autodesk provides 3D design, engineering and entertainment software and services worldwide. The company sells software suites focused on architecture, engineering, construction, manufacturing, and media. Its architecture, engineering, and construction (AEC) segment and its legacy AutoCAD business accounted for 72% of its revenue in the recent quarter.
Autodesk announced Q4 FY22 results on Feb. 24. Revenue increased 17% year-over-year (YOY) to $1.21 billion. Non-GAAP income came in at $421.6 million, or $1.50 per diluted share, up from $314.6 million a year ago. Cash and equivalents ended the period at $1.5 billion.
Autodesk software suites are popular across all its business segments and deployed by many companies worldwide. Such a broad user-base shields the company from adverse effects of recessions and geopolitical risks.
Autodesk bills customers on a subscription basis. Due to the high initial costs of switching to a competitor, Autodesk has the pricing power to pass on regular price increases to businesses. Such a subscription model generates revenue every single year until the customer drops the software entirely.
The company issued revenue guidance of 14% to 17% growth in 2022. Management is also projecting non-GAAP EPS to grow by 28% to 35%.
Autodesk stock hit a 52-week low of $186.29 on Mar. 14. It currently trades around $213, that’s still down 24% year-to-date . Shares are valued at 32 times forward earnings and 11 times trailing sales. The 12-month median price forecast for Autodesk is at $285.50.
Growth Stocks to Buy: Autozone (AZO)
52-week range: $1,274.48 – $2,110.00
Autozone is the largest auto replacement parts and accessories retailer stateside. Although most sales are to retail customers, sales to domestic commercial clients are growing rapidly.
Autozone released Q2 FY22 results on Mar. 1. Revenue grew 15.8% YOY to $3.4 billion. Net income came in at $472 million, or $22.30 per diluted share, up from $346 million, or $14.93 per diluted share, a year ago.
The chip shortage has led to price increases across the board in the auto market. Research company Edmunds suggests that over 80% of car buyers paid on average $700 more than the suggested retail price last January, compared to just 3% who did so a year ago.
Due to soaring prices, car owners tend to keep their cars longer, providing considerable business growth for retail parts suppliers. Given to its ability to pass along price increases to consumers and suppliers, Autozone maintained its gross margin of 53% in 2021.
Autozone stock is around $1,953, up more than 45% over the past 12 months. Yet, it’s down 4.5% YTD. Shares are trading at 18.8 times forward earnings and 2.6 times trailing sales. The 12-month median price forecast for Autozone stands at $2,183.50.
52 week range: $43.62 – $68.49
Dividend Yield: 3.29%
Santa Clara, California-based Intel is the world’s largest semiconductor chip manufacturer. The company produces microprocessors for the global personal computer and data center markets.
The 2021 launch of its Alder Lake processors has allowed Intel to increase its market share in the desktop processor market. As of February 2022, Intel has a 75% overall market share in this lucrative market.
Intel issued Q4 2021 results on Jan. 26. Revenue increased 3% YOY to $20.5 billion. Non-GAAP net income came in at $4.5 billion, or $1.09 per diluted share, down from $6.1 billion in the prior-year quarter. Cash and equivalents ended the period at $4.8 billion.
The chip giant announced a $20 billion investment in two new foundries in Arizona. In addition, the recently announced $5.4 billion acquisition of Tower Semiconductor (NASDAQ:TSEM) will allow Intel to produce specialty chips, such as industrial sensors and radio frequency controllers.
INTC stock trades at $47.45, down almost 28% over the past year. Shares have a cheap valuation at 13.9 times forward earnings and 2.5 times trailing sales, implying limited downside risk. It also appeals to income investors with an attractive dividend yield of 3.3%. The 12-month median price forecast for Intel stock is at $53.
Growth Stocks to Buy: Nextera Energy (NEE)
52-week range: $69.79 – $93.73
Dividend Yield: 2.15%
NextEra Energy is the largest publicly-traded electric utility holding company in the world, serving over 11 million customers. It is also the world’s largest solar and wind energy producer, leading the drive in sustainable energy.
Management announced Q4 2021 results on Jan. 25. Revenue jumped 15% YOY to $5.05 billion. Adjusted net income came in at $814 million, or 42 cents per share, up from $785 million in the previous year. Cash and equivalents ended the quarter at $1.3 billion.
The utility giant benefits from the ever-growing demand for renewable energy. NextEra continues to extend the scope of its renewable portfolio with green hydrogen, water, and battery storage projects. In addition, the company has announced investments of about $55 billion in American infrastructure projects through 2022.
NEE is a Dividend Aristocrat supporting a 2.15% dividend yield. Moreover, the company anticipates double-digit earnings growth in 2022.
The stock is priced around $82, down 10% YTD. Shares have a moderate valuation at 27.6 times forward earnings and 8.9 times trailing sales. The 12-month median price forecast for Nextera stock stands at $90.50.
Service Corporation International (SCI)
52-week range: $48.24 – $71.71
Dividend Yield: 1.62%
Service Corporation International is a deathcare products and services company. It provides funeral and cemetery services and products via more than 1,900 funeral homes and cemeteries in 44 states and eight Canadian provinces.
Service Corporation released Q4 2021 results on Feb. 14. Revenue grew 8% YOY to $1.04 billion. Net income came in at $206.5 million, or $1.24 per diluted share, compared to $201 million, or $1.15 per diluted share, a year ago. Cash and equivalents ended the period at $269 million.
Benjamin Franklin recorded in a letter, “In this world, nothing can be said to be certain, except death and taxes” in 1789. This quote still holds true today. Even recessions have minimal adverse effects on businesses like Service Corporation.
Moreover, the funeral and death-related industry saw a spike in revenue during Covid-19. The company highlighted the impact of the pandemic and raised its 2022 bottom-line guidance. Management forecasts adjusted EPS to come in at around $3.00, up from $2.80 projected earlier.
SCI stock currently hovers below $64 territory, up 33% over the past year. Shares are trading at 20.3 times forward earnings and 2.5 times trailing sales. The 12-month median price forecast for Service Corporation stock is at $77.50.
Growth Stocks to Buy: VanEck India Growth Leaders ETF (GLIN)
52-week range: $32.59 – $44.17
Expense ratio: 0.81% per year
Our final recommendation is an exchange-traded fund (ETF), namely the VanEck India Growth Leaders ETF. It provides exposure to fundamentally sound Indian companies that reveal attractive growth potential at a reasonable price. The fund became available in August 2010.
GLIN, which has 81 holdings, tracks the MarketGrader India All-Cap Growth Leaders Index. With regards to sub-sectors, we see information technology (28.4%), followed by materials (26.9%), and health care (20.7%), among others. The top 10 stocks in the portfolio account for almost 45% of $65.5 million net assets.
Leading holdings in the fund include global IT services provider Infosys (NYSE:INFY), paints and coatings manufacturer Asian Paints, IT services and consulting company Tata Consultancy, pharmaceuticals company Cipla, and Divi’s Laboratories, which manufactures pharmaceutical ingredients.
The ETF is trading at $38.32 and has gained more than 12% in the last 12 months. Yet, it has been trading down over 10% YTD.
On the date of publication, Tezcan Gecgil 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.