After a disappointing 2022, the first half of the year has been all you could ask for from growth stocks. There are many reasons to believe that the year’s second half will also be profitable.
Remember where we came from. The Dow Jones Industrial Average was down more than 20% at times last year before finishing 2022 with a 9% loss, and that was one of the better performances of the miserable year. The S&P 500 finished 2022 down 20%, and the Nasdaq composite sank 34%. It wasn’t a growth stocks kind of year.
All three are rebounding. The Dow’s been the most measured, up 2% on the year, while the S&P 500 rose 12%, and the tech-heavy Nasdaq is up 27% in 2023.
What does that tell us?
The Nasdaq stocks had the furthest to gain because they dropped the most. But they still haven’t regained all their 2022 losses. The Nasdaq index is still down nearly 15% from where it was at the beginning of 2022. The Dow, which fell the least amount last year, is down 5.6%, and the S&P 500 is off 8%.
Growth stocks suffered the most in 2022 and now have the most to gain. And when you add to that the enthusiasm on Wall Street for artificial intelligence products, you have a recipe for outsized gains in the second half of 2023.
The Portfolio Grader highlighted several intriguing growth stocks flashing buy signals.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the second-largest company in the world (spoiler alert: we’ll get to No. 1 later in this list), with a market capitalization of $2.5 trillion. It reached the $1 trillion market cap milestone in June 2019 and then added another $1.5 trillion.
Only four companies worldwide have a market cap of $1.5 trillion, and Microsoft built that much value in just four years.
It’s pretty impressive that you can consider a company this large and established as a growth stock, but Microsoft fits the bill.
The stock is up nearly 40% this year as investors rallied around the company’s revolutionary in its Bing web browser thanks to generative AI powered by OpenAI’s ChatGPT.
But I also like Microsoft for two other reasons that have nothing to do with AI. The company’s non-AI consumer and business offerings still have room to bounce, and when they do, it will push the MSFT stock higher.
Also, earnings forecasts beyond FY2024 indicate Microsoft is expected to enjoy even higher levels of profitability as part of a multi-year growth resurgence.
All in all, MSFT is an outstanding growth stock for the second half. It has “B” ratings in the Portfolio Grader for both earnings growth and sales growth.
Apple (AAPL)
I’m not going to make you wait for it. Apple (NASDAQ:AAPL), the largest company in the world by market capitalization at nearly $3 trillion, also makes our list of growth stocks to buy in the second half.
Apple’s been on fire in 2023, up 44% and helping to push its market capitalization up 27% since Jan. 1.
Why is that going to continue in the second half? One primary consideration is Apple’s expected iPhone release, which is expected in the third quarter.
An estimated 250 million iPhones are at least four years old. And since the average iPhone sale comes to nearly $1,000, there’s a lot of revenue to be had in the second half of the year.
Apple also uses AI to its advantage to improve its products. A new update will use AI to spellcheck your texts by considering the context of the words that you’re using. That will hopefully reduce annoying and sometimes embarrassing auto-correct mistakes and make people appreciate their iPhones even more.
AAPL stock has “B” ratings for earnings growth and sales growth from the Portfolio Grader.
Nvidia (NVDA)
No list of growth stocks to buy in the second half of 2023 would be complete without Nvidia (NASDAQ:NVDA). The chip maker is seeing unprecedented demand for its top-line chips because they’re used to power many of the most significant AI advances.
Like many other growth stocks, shares fell in 2022. A slump in graphics card sales pushed NVDA down by 50%. While the first quarter results showed signs of progress, the stock took off when Nvidia adjusted its guidance for Q2.
It boosted its expected revenue from $7.2 billion to $11 billion, an increase of 64% from just a year ago. The growth was attributed to the demand for NVDA chips to power generative AI applications.
Nvidia also announced a new partnership with Snowflake (NYSE:SNOW) to develop custom AI models and help Snowflake customers develop their own AI assistants.
I think $11 billion in quarterly revenue will look like a comparatively small number for NVDA in the second half. NVDA has a “B” grade in the Portfolio Grader for earnings growth and an “A” rating for sales growth.
Oracle (ORCL)
Even an older computing company like Oracle (NYSE:ORCL) is entering the AI business. Oracle announced that it’s creating a generative AI cloud service tied to a partnership with a startup, Cohere, that uses Oracle’s cloud infrastructure.
Moves like that bode well for Oracle’s continued success. ORCL stock is up 44% in 2023.
The company already reported earnings for its fiscal fourth quarter, which ended May 31. Revenue was up 17% on a year-over-year basis, and cloud services and license support revenue was up 23%.
Oracle’s moves to expand its cloud services are paying off for shareholders. Oracle spent $28 billion a year ago to buy the healthcare IT software company Cerner and bought cloud software company NetSuite in 2016.
It shows that even a tech company pushing 50 years old can still innovate and be a growth stock. ORCL has “B” grades from the Portfolio Grader for both sales and earnings growth.
Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (NYSE:CMG) is a different kind of fast food restaurant. Not only does it forgo burgers and fries in favor of burritos and rice bowls, but it’s also made a name for using only fresh ingredients.
From a corporate structure point of view, it’s interesting that Chipotle rejects the franchise model that many fast-food chains use – the company owns all of its 3,200 restaurants in the U.S., Canada, the U.K., France and Germany.
CMG stock is up 48% this year after a massive jump following its first-quarter earnings report. In that report, Chipotle had revenue of $2.4 billion, an improvement of 17% from a year ago. But the eye-popping number was net income, which was $291.6 million, an increase of 84% from the previous year. Earnings per share were $10.50.
Chipotle announced plans to open another 255 to 285 restaurants by the end of the year. CMG stock has an “A” rating in the Portfolio Grader for earnings growth and a “B” rating for sales growth.
PDD Holdings (PDD)
PDD Holdings (NASDAQ:PDD) is the corporate parent of Pinduoduo, a Chinese e-commerce company. Pinduoduo focuses on the agricultural industry, facilitating small-scale farmers’ sales of fruits and vegetables directly to consumers.
Unlike other names on this list, PDD is in the red for the year’s first half. The stock is down 12% as it and other Chinese e-commerce stocks faltered while China began emerging from its Covid-19 lockdowns.
But with a population of 1.4 billion, China’s e-commerce market is formidable, even when in a lull. It has a projected market value of $1.48 billion this year.
And Pinduoduo will undoubtedly keep a large percentage of that market. The company generated $21 billion in revenue last year and a healthy net income of $5.4 billion.
PDD is also expanding into Western markets. Its Temu app, which provides heavily discounted goods from China, is the most downloaded shopping app in the U.S., Germany, the U.K., France, Canada and Italy.
PDD stock is heavily discounted now, but the second half of the year looks exceptionally promising. PDD has “A” ratings in the Portfolio Grader for both earnings growth and sales growth.
Acushnet (GOLF)
Acushnet (NYSE:GOLF) designs, develops and distributes products for golfers. Its most recognizable brand is Titleist, which includes branded golf balls, clubs and other gear. Another brand, FootJoy, provides golf shoes, gloves and other apparel.
The Massachusetts-based company was founded in 1932, so it has plenty of staying power. But what makes it a growth stock more than 90 years after it was founded?
One significant catalyst has been in the news lately: a sudden and shocking agreement between the PGA Tour and Saudi-backed LIV Golf League to drop the lawsuits between the two organizations and announce a “newly formed commercial entity to unify golf.”
This spring’s announcement sent GOLF stock up by 5% in a single day, as Jefferies analyst Randal Konik suggested that the agreement holds “immense potential to elevate the sport of golf to new heights.”
Acushnet was already trending in the right direction. Earnings in the first quarter of $686.3 million were 13% better than a year ago and beat analysts’ expectations for $631.12 million. Earnings per share of $1.39 was 30 cents per share better than the Street expected.
GOLF stock is up 26% in the year’s first half, with more to come. It has a “B” rating from the Portfolio Grader for earnings growth and an “A” rating for sales growth.
Novartis (NVS)
Swiss pharmaceutical company Novartis (NYSE:NVS) produces prescription drugs, generic medications and eye care products. It has a broad portfolio of drugs – only two (Entresto, a heart failure drug, and Cosentyx, a psoriasis treatment) account for 10% of the company’s annual revenue.
The company’s been working to shed side businesses, such as divesting its eye care unit Alcon (NYSE:ALC), and plans to spin off its generic drug business Sandoz.
One thing to keep a close eye on is Cosentyx. European Union regulators approved the drug to treat patients with moderate-to-severe hidradenitis suppurativa (HS), a progressive inflammatory skin condition.
Previously, AbbVie’s (NYSE:ABBV) Humira was the only drug to treat HS, so there’s an opportunity for Novartis to capitalize on a new revenue stream.
Revenue for the first quarter was $12.95 billion, with EPS of $1.71, both better than expectations of $12.6 billion and EPS of $1.54. NVS stock has a “B” rating in the Portfolio Grader for earnings growth and an “A” rating for sales growth.
On the date of publication, Louis Navellier had a long position in MSFT and NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article had a long position in AAPL. The staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
