2023-07-04 02:25:15 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
The stock market has turned things around. After a difficult 2022, shares are rallying sharply this year. The best growth stocks are leading the way in particular, with the Nasdaq 100 Index posting its strongest first half of a year on record.
After such a huge run, investors might naturally fear missing out. Some prudence is required, though, to avoid stocks which have become overvalued or risky thanks to the recent price increases.
The good news is that there are still plenty of good growth stocks out there at reasonable prices today. These are the seven best growth stocks to have at the top of your watchlist.
Microsoft (MSFT)
Source: FellowNeko / Shutterstock.comMicrosoft (NASDAQ: MSFT ) is one of the world’s largest and most dominant tech companies as well as one of the best growth stocks to own. That might give investors the impression that the firm is already a mature company whose best growth days are behind it.
However, Microsoft continues to post surprisingly strong results. For years, the firm’s fast-moving Azure cloud computing division powered this, and that remains a strong growth opportunity in the coming years.
And now Microsoft is making its move into artificial intelligence as the next big frontier. The firm has partnered with OpenAI to implement ChatGPT into Microsoft products such as Bing and Office.
There should be additional synergies across Microsoft as intensive applications in fields such as AI and quantum computing are built on top of Azure, adding to cloud demand.
All this to say that while Microsoft is already a behemoth, it’s got plenty more left in the tank.
Albemarle (ALB)
Source: IgorGolovniov/Shutterstock.comBased in North Carolina, Albemarle (NYSE: ALB ) is one of the world’s largest lithium producers and one of the best growth stocks in the space.
It has operations primarily in the United States, Chile, and Australia and is looking for further acquisitions in that latter market.
Lithium should be a strong growth market in the decade to come as it is a key input for batteries that go into electric vehicles.
To that point, Albemarle saw its revenues soar from $3.1 billion in 2017 to $7.3 billion in 2022. The firm has benefited from both rising volumes and improved pricing in the lithium market.
While the long-term trend is higher, the lithium market hit a soft patch over the past year amid weakness in the Chinese battery market. This has given investors a second chance to pick up ALB stock on the cheap, with shares currently at a single-digit P/E ratio.
Sprinklr (CXM)
Source: ShutterstockSprinklr (NYSE: CXM ) is a software-as-a-service company focused on customer experience.
Its main offering is for applications that help firms manage their branding and online relationships. Specifically, it helps clients monitor their activity, brand, and marketing efforts across various social networks.
Instead of having a haphazard collection of marketing efforts across various sites and ad networks, Sprinklr helps clients have a centralized system for keeping tabs on different channels, keywords, campaigns and so on in one place.
Today, the appeal to Sprinklr is that it is taking aim at key rival Sprout Social (NASDAQ: SPT ). Sprout trades at a far higher price-to-sales ratio than Sprinklr, and yet it seems vulnerable to losing market share to Sprinklr.
Unlike many SaaS companies, Sprinklr is profitable today and analysts forecast 15% annualized revenue growth over the next three years.
Avnet (AVT)
Source: Michael Vi / Shutterstock.comAvnet (NASDAQ: AVT ) is a specialized distribution company focused on technology.
In particular, it distributes semiconductors and related items, such as interconnect and electro-mechanical devices. Avnet has an array of both suppliers and end clients. T
he company also offers some consulting services, helping IT professionals plan and implement supply chain, product design, and technical education solutions.
While distribution may seem like a boring business, it can be lucrative thanks to the massive volumes involved. Prior to 2020, Avnet brought in about $18 billion per year in revenues and that figure topped $25 billion as semiconductor demand surged in recent years.
The slowdown in sectors of the semiconductor industry such as memory and graphic processing units (GPUs) has hit the short-term outlook. But AVT stock looks much too cheap at seven times forward earnings.
The company also announced a $600 million share buyback last year will also accelerate the firm’s earnings per share growth rate in the future.
Intel (INTC)
Source: JHVEPhoto / Shutterstock.comSticking with semiconductors, Intel (NASDAQ: INTC ) finds itself in an interesting place heading into the back half of 2023.
It’s no secret that the company’s short-term results have been a huge letdown. The plunge in PC demand over the past year has caused a collapse in Intel’s gross margins and earnings. Things aren’t likely to get better on this front until 2024 at the earliest.
However, there’s a bigger game afoot. That’s the global semiconductor supply. Namely, a massive amount of the world’s semiconductor chip supply is currently located in Taiwan and other parts of East Asia. These facilities are potentially under threat as China has engaged in increased saber-rattling.
As a result, the United States passed the CHIPs Act which gives tens of billions of dollars in subsidies to firms that build new fabs in the U.S.
Intel will be the leading recipient of these funds as it is investing a stunning $100 billion in new manufacturing capacity in Ohio. As Intel has a mere $140 billion market cap today, this is a massive repositioning of the firm that, if successful, should launch a whole new era of prosperity for the chip giant.
Fidelity National Information Services (FIS)
Source: JHVEPhoto / Shutterstock.comFidelity National Information Services (NYSE: FIS ) is a diversified information technology company.
The firm originally built its business around providing core processing functions to banks and financial institutions. In recent years, it has branched out.
Fidelity National Information is now a leader in payment processing thanks to its 2019 purchase of Worldpay. It also entered the market for record-keeping for custodians, asset managers and traders with its SunGard acquisition.
But the firm’s upward trajectory has abruptly reversed over the past 18 months. Momentum from growing e-commerce sales has flipped into reverse as shopping patterns have normalized.
Meanwhile, the collapse in other payments stocks such as PayPal (NASDAQ: PYPL ) have sent shockwaves through the industry.
FIS stock is the baby that’s been thrown out with the bathwater. Shares go for less than ten times forward earnings, and analysts project a return to strong earnings growth in 2024.
Morningstar’s Brett Horn believes FIS stock is worth $83 , whereas it trades around $58 today.
Ubiquiti (UI)
Source: rafapress / Shutterstock.comUbiquiti (NYSE: UI ) is a communications equipment company.
It offers routers, switching equipment, security gateways, video surveillance products, and so on, giving both consumers and enterprises the tools they need for reliable networking.
Last year, Ubiquiti had struggled as it wasn’t able to produce goods fast enough to keep up with demand. Now that the surge in demand related to the work-from-home trend has ended, however, Ubiquiti finds itself with inventory building up.
This has pushed UI stock down 35% year-to-date.
However, things aren’t that bad. In the firm’s most recent quarter, for example, revenues grew 27.8% year over year and EPS nearly doubled versus the same period of 2022. While there will be a slowdown over the next few quarters, investors have sharply overreacted.
Meanwhile, Ubiquiti is buying back gobs of stock. UI’s outstanding share count is down from 90 million in 2014 to 60 million now, with the possibility of more repurchases into this recent share price decline. Meanwhile, Ubiquiti shares sell for less than 20 times estimated fiscal year 2024 earnings.
On the date of publication, Ian Bezek held a long position in ALB and INTC stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .
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