3 Growth Stocks To Buy Now
There are many ways for investors to profit in the stock market. But for investors with long time horizons, one of the best ways to grow their portfolio is to buy growth stocks. Growth stocks are stocks of companies whose earnings will likely grow at above-average rates relative to the broader market.
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Of course, growth stocks expose investors to greater volatility, or beta. This means that investing in these companies can be a lot like riding a roller coaster in the short-term. But for investors taking the long-term approach, history has proven that growth stocks tend to outperform the market — meaning investors have greater potential of reaching their retirement goals sooner.
In this vein, below are three stocks with better than average prospects for long-term capital appreciation. Although disparate in nature, each of the companies has something in common. All three companies have a strong secular trend providing a significant tailwind for the stocks to grow. But remember, secular trends experience volatility, and these stocks will, too.
The first stock is Chipotle Mexican Grill (Nasdaq: CMG). This Denver-based fast casual food chain has certainly seen its share of volatility. A well-publicized food safety issue in 2015 caused investors to flee the stock in droves. And before the dust settled, the stock got crushed — declining more than 63% from its 2015 high.
As you can see from the chart above, the company is just now getting back on track. Still, the stock trades at a hefty 41% discount to its previous levels back in 2015.
But there’s every reason to believe the company has finally turned a corner. The company is raising its prices. Of course, no company would do such a thing if they were still under the shadow of food safety issues. And the price hikes are precipitating higher same store sales and earnings. It also indicates that consumers are willing to look past events that happened more than 18 months ago.
More importantly, the higher prices will also help the company meet its expansion plans for the remainder of 2018 and all of next year. The additional stores should drive even more top-line growth, and over the long-term, significantly help Chipotle’s bottom line growth. And should the company get its growth back on track, as it seems likely to do, the stock will quickly move to the levels at which it traded in 2015. Better yet, the sky’s the limit from there — making Chipotle a strong buy at current levels.
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Researchers are making great strides in developing innovative cancer treatments. At the forefront of innovative treatments is technology in the field of T-cell immunotherapy — officially chimeric Antigen Receptor T-Cell Therapy (CAR-T). This therapy uses a patient’s own lymphocytes (T-Cells) and “re-engineers” them to fight cancer.
Atara BioTherapeutics (Nasdaq: ATRA) is a leading T-cell immunotherapy company located in San Francisco. The company is developing cutting edge treatments for patients with various types of cancer. And the company is on the verge of a major breakthrough by attempting to become the first company with a scalable adoptive cell therapy for cancer – something no other company has been able to accomplish.
Leading the way is its tabelecleucel platform, which is showing great promise for solving the scalability problem for adoptive therapies. If successful, they would be the first company to unleash the long-awaited potential of this multi-billion-dollar market.
Currently, the company is in late-stage testing for tabelecleucel. The company expects a regulatory filing with the EU in the first half of 2019. Assuming this timeline holds true, expect a giant biopharma company to acquire Atara at a huge premium to its current value.
In part, this helps explain the brilliant performance of the ATRA stock over the past 12 months, rising nearly 260%. But don’t let the move scare you. This stock is going higher — on its own or as an acquisition by a bigger player. The time to buy is now.
A Growth Stock Masquerading As A Value Stock
Skechers (NYSE: SKX): is the fast growing footwear company located in Manhattan Beach, California. The company is riding a huge secular trend of international growth fueled principally by growth in India and China.
In China alone, the company shipped 4.4 million pairs of shoes in the last quarter, arising from more than 3,200 points of sale across the country. International revenue now makes up more than 50% of the company’s sales, and long-term demographic changes over the next several decades are the catalyst to take this stock much higher.
For investors, the market’s shortsighted view of long-term trends has provided an incredible buying opportunity for this stock. The chart shows the extent of the beating investors have given Skechers since April. Here, the market’s overreaction to Skechers’ relatively modest outlook for 2Q2018 growth is just the reason investors should go long with this wildly successful company.
The company’s revenues have grown by more than 16% YOY, while its profits rose 25%. But if you take into consideration the amount of cash the company is holding, it trades with a trailing price-to-earnings ratio of just 12.7. That makes this growth stock a screaming buy at these levels.
Expect a few bumps in the road in the short-term, but this stock is going higher – and deservedly so.
Risks To Consider: Long-term secular trends are volatile by nature. That’s because the cycles extend well-beyond the normal business cycles of any one economy — especially the U.S. economy. As such, EPS growth will experience periods of outsized growth followed by relative underperformance. It’s imperative to have a long-time horizon for any of these stocks.
Action To Take: Buy shares of CMG up to $475/share. Buy shares of ATRA up to $45/share. Buy shares of SKX up to $31/share. Mitigate the risk to your portfolio by using no more than 2% of your portfolio to any one position. Due to the long-term nature of these secular trends, place a 50% trailing stop loss on each position. Expect to hold each position for more than 3 – 5 years.
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