TOP FIVE GROWTH STOCKS TO INVEST
Before analyzing the current growing stocks, let’s just quickly go through what exactly growth stocks are and why they grow at a rate higher than average growth prevailing in market.
In general terms, Growth stocks are those stocks which increases with fast pace as compare to other similar stocks existing in given market of country. It is the possibility that the companies which are falling under growth stocks list have more than expected revenues and profits due to various factors like proper implementation of strategy, continuous innovation in products etc. The growth stocks are mostly preferred for investment by risk- prone investors who are willing to take big risks for increasing their potential return on investments.
Before identifying the growth stocks firstly let us go through some common features of growth stocks:-
a. Low dividends:- The companies with growth stocks offer very nominal or you can say less dividends with a very minimal rate as the company more probably prefer to put back their accumulated profits in the form of retained earnings into the company for more multiplication of the companies revenue.
b. High returns than market :- The growth stocks definitely have an edge here as it ensures considerably higher returns in long-term than other similar options in market. Along with this, investment in growth stocks ensure wealth accumulation for longer period through capital gains.
c. Security from bubbling inflation :- As after covid-19 epidemic, we all can see the severe conditions of stagflation in our economy where inflation and unemployment both are increasing altogether. And at this type of situation, growth stocks can assist the investor in any case through a higher per capita income in long run.
Alright, now after going through it’s features it’s high time to explore risk factors associated with growth stock as well.
a. Uncertainty due to high risk factor:- In short term, there is high certainty of risks with growth stocks and can be riskier than other average stocks and if you are a risk averter kind of person then you can look for value stocks instead of growth stocks.
b. No dividend payments in short run:- As there is no dividend for growth stocks in short run and in case if the firm turn out losses in the long run then investors may lose their entire investment.
c. High Price-to-earnings ratio:- The companies generating high revenues and profits have a high price to earnings (P/E) ratio that is the shares of such companies generally issued at a higher premium as such companies are expected to grow in future. That’s why for buying growth stocks, investors have to pay much higher than it’s face value. Examples of preferable Growth Stocks to invest:-
? Netflix (NFLX) = The Netflix is called as a ‘growth stock’ company in market as it is the first company to offer online streaming services as it is having competitive advantage over other companies due to it's Unique Selling Proposition (USP).
? Britannia Industries = As Britannia Industries is one among the largest FMCG companies in India and manufactures the kind of products which are almost used in every household. This is the reason company is having ROE and ROCE at 46.9% and 45.4% respectively. Overall, it is also a good choice for investment in growth stocks.
? Amazon.com Inc. (AMZN) = Amazon also joins the list of growth stock companies from a long period of time and during this lockdown, Amazon revenues increased with 38% and after this quarantine as well people will permanently shift towards digitalized things.
Hope this article gives you some idea about growth stocks.
“Happy Investing!!”
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