When it comes to growth investing, it’s hard to decide how to pick the best stocks. Some growth stocks can deliver significant profits in a hurry as they race up on optimism about the future. However, if that outlook sours down the road, the fall from grace can be even more dramatic.
For most investors, the responsible way to buy growth stocks is to look for proven companies that have a track record of expansion and success. Past performance is never an indication of future returns, but it’s logical to think that some companies riding big-picture trends are likely to see continued growth as long as those megatrends hold.
But before we get to the list of the best stocks, it’s worth discussing a few foundational points about growth investing as a philosophy.
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What Is Growth Investing?
Growth investing is a strategy that seeks out firms expected to grow their business at above-average rates. This can be compared to the market at large, as well as within their specific industry groups.
Generally speaking, some sectors like technology are more naturally suited for growth, while others like utility stocks generally are not. After all, we can understand how a software firm could dramatically increase margins or develop a wholly new product line, but it’s hard to imagine a highly regulated and geographically limited electric company can ever double its revenue or customers in short order.
Growth stocks generally carry a bit more risk. After all, what happens if that software company’s next big product falls flat, or a younger Silicon Valley startup develops a new and unique business model that changes the game? Thinking back to that same local utility stock, there’s not much risk of competition or disruption.
If you’re comfortable with this slightly different focus and risk profile, however, growth investing can indeed be a profitable enterprise when you put your money behind a stock that can consistently deliver on promises of bigger revenues and profits.
The following growth stocks offer different flavors of how to play long-term trends. They have proven track records of recent growth, as well as business models that seem unlikely to face major disruption in the years ahead.
As noted, there are never any promises in the short term, let alone 10 years down the road. But on balance, these are five growth stocks that stand out above the rest:
— Apple Inc. (ticker: AAPL)
— Exact Sciences Corp. (EXAS)
— MercadoLibre Inc. (MELI)
— Salesforce Inc. (CRM)
— Visa Inc. (V)
Apple Inc. (AAPL)
Apple is hard to beat when it comes to growth stocks. The company is currently valued at $2.4 trillion, so it’s hard for some to imagine it can keep growing. But keep in mind that the tech giant became the first $1 trillion dollar U.S. stock back in August 2018, and it topped $2 trillion in valuation roughly two years later. Things have slowed down thanks to the volatility of the last year, but there’s little doubt that Apple has what it takes to dominate consumer tech for many years to come.
Exact Sciences Corporation (EXAS)
Medical diagnostics firm Exact Sciences is a great example of a long-term growth stock, as it has an innovative approach to meet a serious and persistent need in the medical sector. Specifically, EXAS offers minimally invasive cancer screening and diagnostic tests that are a vital part of preventative medicine. Nearly everyone is a potential customer of a service like this, which creates a massive addressable market. The company regularly clocks profit and sales growth, and thanks to a demographic shift in the U.S. toward a generally older population, it’s a pretty safe bet that there will be growing demand in the years ahead.
MercadoLibre Inc. (MELI)
Adding an international flavor to the list, MercadoLibre is often referred to as the Amazon of Latin America. That’s for good reason, as it operates a consumer-focused internet marketplace that dominates the most populous and lucrative regions in the area, including thriving city centers in Brazil and Argentina. Thanks to its rapid expansion, Wall Street is expecting roughly 25% revenue growth in fiscal 2023 and another 25% or so in fiscal 2024. With a rising middle class and continued recovery and growth for these regions as they move past COVID-19 related disruptions, the best way to play the rising consumer class in emerging markets is a stock like MELI.
Salesforce Inc. (CRM)
For those unfamiliar with the lingo, the Salesforce ticker CRM is short for “customer relationship management.” This is the go-to approach for modern marketers and salespeople, offering quantifiable ways to check in on prospects and ultimately close a deal. Salesforce is the gold standard in the industry, commanding a roughly 23% market share with its next-closest competitors like Microsoft Corp. (MSFT), SAP SE (SAP) and Oracle Corp. (ORCL) lagging behind at only about 5% to 6% each.
This dominance means Salesforce is typically the go-to product for new entrants into a marketplace, and continued improvements to pricing and product offerings mean embedded customers have more revenue potential. It seems highly unlikely that any firm will disrupt this profitable and growing business anytime soon.
Visa Inc. (V)
A $450 billion payments powerhouse, Visa has an enviable track record of growth that includes an increase in both top- and bottom-line figures last year that was more than 20% on both fronts. And looking forward, analysts are collectively calling for sales growth of double digits in both 2023 and 2024. There’s not a huge secret to Visa’s success, as it is one of the leaders in “cashless” transactions. That includes processing branded credit and debit card swipes, among many other things. And as the world moves to an increasingly digital economy, cashless payments are a trend that is sure to lead Visa to continued success in the years ahead.
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5 Best Growth Stocks for the Next 10 Years originally appeared on usnews.com
