Best Growth Stocks Right Now

Growth stocks are made up of companies that are set to grow their earnings and revenue by an abundant amount compared to the rest of the market, which also has an impact on the price of each company’s stocks. This group of companies includes some of the world’s most well-known and most prominent firms, such as Netflix, Disney, Amazon, and Meta Platforms. 

Stocks in the growth sector, holistically represented by the iShares Russell Top 200 Growth ETF (IWY), have broadly outperformed the market as IWY has provided investors with lower returns than these stocks. They might have started as value stocks, or they are simply presenting the best potential for investors. Either way, you need to judge their growth potential, review growth opportunities across your portfolio and calculate their growth rate for at least the last 12 months.

Here are the top stocks across all sectors. Remember, you can diversify your growth stocks just like you would diversify the whole of your portfolio.

Quick Look at the Best Growth Stocks:

• Alphabet
• Qualcomm
• MercadoLibre
• Shopify
• PayPal
• Constellation Energy Corp
• Aehr Test Systems
• Etsy
• McDonalds
• e.l.f. Beauty, Inc.

Overview

Growth versus value is one of the oldest battles on the stock market, a rivalry on par with Yankees/Red Sox or Elon Musk and the SEC. Value investors seek out unheralded companies with excellent balance sheets and price ratios. Value stocks, then, are cheap stocks. But, cheap doesn’t mean “easy to deal with” nor does it mean “will obviously gain value.” The market capitalization and net income of these assets is not guaranteed to always rise or remain high. In fact, market indexes might not be impacted by these assets as much as you think.

On the other hand, investors looking for these stocks aren’t as concerned about fundamentals. In the world of growth, investors don’t bother looking at the P/E ratio half of the time. Growth investors are concerned with growth — how much the company is expanding in terms of revenue, clientele and market capture. While you’re looking into growth, you need to decide how much growth you need, when you plan to exit the position and if that growth is sustainable.

When investing for growth, investors look for stocks that have the potential to dominate a large swath of the market. Companies looking to fill a niche market won’t suffice, nor will companies that seek to return profits to shareholders like banks or consumer staples. Growth companies reinvest their extra profits back into research and development or expansion, so dividend payments are small or nonexistent. Investors in growth companies are looking for one thing only — stock price appreciation.

A buying opportunity, then, is only good for when it clearly matches your intent and cash flow. Wall Street isn’t predictable, but research can help you make better choices.

Best Online Brokers for These Stocks

These stocks are some of the most heavily traded shares on the market, so choose the broker with the best features for your type of trading. If you’re looking for long-term appreciation from the stocks, a commission-free broker works best so you can trim losers and add to winners. If you’re using a broker you understand, it’s much easier to make money, exit bad positions and make snap decisions. In fact, making the right choice is often simpler when you use a broker that’s feeding you good information and educational tools.

Benefits of Growth Stocks

• Large potential market of customers: One of the reasons Amazon, Google and Netflix grew to such heights was their potential client base — limited only by the strains of the earth’s population. Millions upon millions of people can search on Google, purchase items on Amazon or watch TV and movies on Netflix. The best of these stocks have global potential, so don’t focus on companies that are happy to find their little niche. Think big.

• Rapid revenue growth: Do growth stocks need growth? You don’t say! Yes, every company wants to grow its revenue but growth stocks do it exponentially. Rapid revenue growth doesn’t mean steady increases of 10% each year. We’re looking for companies doubling their sales every year or 2.

• Debt load not cumbersome: Most growth-focused companies have no issues packing on the debt, but there are limits. If the debt becomes too much to manage, a high-flying growth stock can quickly plummet.

• Potential long-term gains: When you invest in growth stocks, you can get into an asset that many people will be praising for decades to come. In the future, you might be shocked by how cheap the stock was when you made your first purchase.

Drawbacks of Growth Stocks

As you look into growth stocks, hoping that they’ll turn into the next Coke or Amazon, you must remember that are some drawbacks inherent in the process. While this shouldn’t put you off in any way, you must assess your appetite for risk while reviewing the biggest problems investors have with growth stocks:

• More initial investment risk: A growth stock does come with more initial investment risk because the company may or may not pan out in the manner you prefer. At the same time, all investments carry some semblance of risk. You may even choose to buy just a few stocks to test out these assets before investing further.
• Investors wait for gains or dividends: While you may see gains in the future, it might take some time for you to see those gains or dividends. Yes, you’re not building income now, but you might be banking future income.
• Difficult to choose stocks: Many investors might believe that choosing growth stocks is easy. Check the news and find companies that are growing. However, businesses are often at different stages of growth, making ti difficult to know if an established company is growing or, perhaps, a smaller company isn’t really going anywhere.
• Growth stocks can change at any time: A growth stock might be on the move today, but it might be on the way out tomorrow. This is why investors are advised to watch their assets carefully and exit positions that are not benefiting them in the long-term.
• Growth stocks are not a get-rich-quick-scheme: While certain popular films might lead you to believe that you’ll get rich by finding just one large cap stock before it takes off, that’s often not the case. You want to diversify your portfolio and enjoy the benefits of large cap stocks without putting all your eggs in one basket.
• Growth stocks take time: Just as you cannot get rich quick, you need to be prepared to wait for quite some time. As growth stocks…grow, they wll show you that they have potential over a long period of time.

Growth Stocks Will Find a Way Into Your Portfolio One Way or Another

Investing in growth stocks is in some ways inevitable. Even if you only purchase Target Date Funds in your 401(k), you’re getting in on the action. Most ETFs and mutual funds are composed of the most successful growth stocks in the market like Amazon, Apple, Google, Microsoft, Netflix and Facebook. But the key for truly successful investors is to find that next great growth stock before its CEO is plastered all over the covers of Forbes and Fortune. By looking at revenue growth numbers and potential market capture, you could find the next Amazon before its share price quintuples.

Remember, some assets can become growth stocks, and you should look out for investments that you want to hold as opposed to selling them off in a swing trade scenario.

Ready to start investing? Check out Benzinga's top picks for the best online brokers for beginners, how to invest in dividend stocks and the best investing books.