Investors with a growth portfolio of stocks have performed quite well in recent years. As a result, you will hear many people talking about the best growth stocks to own in today’s market. However, many times those declarations are lacking a proper growth investing strategy that helps guide investors in their stock selection process.
We at Wealthplicity want to make sure your growth investing strategy is developed first, and only then can you pick the best growth stocks for your portfolio.
You may decide to balance your growth investing with a “value vs. growth” or an “income vs. growth” strategy, but since everyone’s investing goals are different you need to develop a growth investing strategy that is right for you.
At Wealthplicity we developed a strategy to help us select the best growth stocks using the following criterion. We believe that this criterion could meet the needs of many investment styles and help them beat the average returns of the stock market over the long haul. For a business to be included in our growth portfolio, it needs to meet all six of the following attributes:
As you apply the above six filters to the 6,000 public companies in the United States you quickly eliminate quite a few of them for different reasons. You would be surprised how many of the public companies meet very few of the criteria and are easily eliminated from investment consideration.
Here are two of our favorite growth stocks for 2021 and beyond. For each company we’ve included how they meet our six point growth investing strategy outlined above and why we think they will do well in 2021 and beyond.
Pinterest (ticker PINS) is a “visual search engine” that allows people to discover images much the way Google allows people to find information.
With a market capitalization of $54 billion, Pinterest is clearly a leader in the technology industry, having carve a sizable niche. With 459 million active monthly users worldwide, they have created a sizable ecosystem that attract users and then keeps them active on the site, returning time and again.
The Pinterest ecosystem certainly reminds you of Facebook on a smaller scale. But much like Facebook you can see the success of the platform being sustainable because of the stickiness of the user experience. Pinterest spent much of its early life developing the platform to attract users and is now in the very early stages of monetizing the site via advertising, etc.
Pinterest is led by Ben Silverman, who helped found the company in 2009. He is widely respected as the chief executive officer. And at just 38 years old, he has an incredibly long runway ahead to build out Pinterest into even more of a powerhouse then it is today.
The most recent quarter saw revenue growth of 67% and it expects next quarter’s revenue growth to accelerate to at least 70%.
With a strong balance sheet with little debt, Pinterest will be a favorite amount mutual fund manager’s and wall street financial advisors to build wealth for investors in 2021 and beyond.
MercadoLibre (ticker MELI) is Latin America’s largest online marketplace operator, so it is sometimes referred to as the “Amazon of Latin America”.
However, it does also have other businesses including a large digital payment processing operations, which is vital in Latin America given that many do not have a bank account.
When you think of sizable long-term trends for the next 20+ years, certainly online retail and the move away from paper money are right on point. MELI is positioned well to execute against those major trends and become quite profitable for the benefit of its shareholders.
When MELI reports its quarterly financial results in the next couple days, analyst expect MELI to grow revenue in US dollars by more than 80% year over year. This is a clear reflection of the large addressable market that MELI is going after combined with excellent execution.
The last ten years has been extraordinary for MELI investors as the stock price has increased from approximately $80 a share in 2011 to approximately $1800 today. More than a 20 bagger. But as extraordinary as that historical run has been, we see the future as very bright for MELI over the next five, ten and twenty years.
Winners find a way to keep winning. And MELI is a winner. This is the one of the kinds of stocks to buy and hold for the long term. It is liked by many portfolio managers of mutual funds and included in growth fund portfolios around the world.
Investing in growth stocks in recent years has been quite profitable for investors.
But to find the best growth stocks you need to start with a growth investing strategy that is right for you and your circumstances.
Consider the growth investing strategy outlined above as a starting point. Certainly modify it as needed to fit your particular style of investing.
Use the two examples of great growth stocks discussed above as examples to get you started in your profitable journey of investing in growth stocks.