One of the main growing sectors is the green sector. However, as this sector is already in the second stage of growth, where initial skeptics now start to realize that this sector can be viable and profitable, stepping in now can become tricky. Nevertheless, in this article The Golden Investor will prove that there are still other investing opportunities which can result into outperforming results.
The first thing to do when looking for growth stocks is looking at certain trends and changes in behaviour which are related to changes of society. This sounds rather vague, but this is exactly how Bill Ackman reasoned his investment in Chipotle (NYSE: CMG). The need for healthier fast-food has led to the resurgence of this stock to almost four times their 2016 low. The second thing to consider before buying a growth stock is asking yourself if this company is going to make a real change. Before investing in growth stocks it is important to note that many of these stocks do not pay-out dividends just yet and competition in growing markets is very high. So before putting money into a growth stock it is important to look at the financials, the competition, the long term outlook and whatever problems or developments a certain company may face in the future.
Rising Level Of Obesity Rates Boosts Diabetes Stocks
One of the most exciting IPO’s of this year has been Livongo Health (NASDAQ:LVGO), already on the radar of The Golden Investor for a while, in recent months it saw a big push after their glucose tracking devices saw a stunning triple digit growth in membership base in early June. The interesting thing is that this company does not solely focus on diabetes, but is also developing several other health tracking technologies for other conditions that demand monitoring. Their diabetes tracking device still has room for growth since their client base only covers one percent of more than 30 million Americans suffering from diabetes. Considering the rise in obesity rates and the greying population in western societies, this company has far more room for growth. However, considering it has seen a rise of 446% since mid-March, there could be some consolidation in the near term, especially since the latest tech-bull run has been one of the strongest rallies in history. Other big players in the health monitoring market are Dexcom (NASDAQ:DXCM) and Teledoc Health, Inc. (NASDAQ:TDOC), which all are active in the tele-health sector, a growing market.
Green Technologies Are Hungry For Neodymium
An impressive V-shaped recovery takes rare-earth miner Lynas back to pre-corona highs. Rare-earths like Neodymium are needed to make magnets and semiconductors which are essential for the growing tech-sector. Especially electric vehicles need rare-earths, and since recycling of rare-earth metals is still very costly and inefficient, Lynas has a bright outlook. Lynas is the only company outside China that can mine and process rare-earths, making it an essential company to the United States. As discussed in a previous article on Lynas, Lynas Corporation Ltd (ASX:LYC) was one of the contenders for a new heavy rare-earth separation plant in the United States as the U.S. Government was starting to worry about their rare-earth dependence on China. This deal in combination with licensing developments in Australia for a new processing plant in Kalgoorlie proves that Lynas is handling business well. Moreover, Lynas has successfully raised $425 million in fresh equity from investors, more notably 44 percent of existing shareholders agreed to subscribed new equity. This not only boosts the cash position of this growing company, it is also showing the vast support of their shareholders. The hunger for Neodymium and other rare-earths is far from over, this growing market is the ultimate growth bet for investors looking for high growth investment opportunities.
The Social Media Perfection, The Second Wave
Since the introduction of social media, the cosmetic and beauty sectors have seen double digit growth numbers over the years. However, this growth has been largely boosted by consumption of women. The need for perfection has led to huge increases in plastic surgeries in the search for beauty. The next trend may be arising soon, as men care more and more about their physical appearance a new growing market may be up next. The amount of people going for a hair-transplantation has been on the rise and will only grow exponentially when acceptance will increase. The limiting factors are the high costs for these kind of treatments, but as technology advances both the costs and the possible negative side-effects will become less and less. Shiseido (TYO: 4911) already saw great growth the last few years, but still has room to grow into this expanding beauty market. Follicum AB (FOLLI:SS) is a relatively small company that is focusing on hair regrowth technologies and although a relatively small player, it has room for growth. With a high P/E-ratio and a big market share L’Oreal (OR:PA) is relatively expensive stock. Their valuation is largely based on future growth and dividends that until now have not been that high. However, it is developing 3D-printing hair technology and is focused on reversing grey hair growth, so it has still room for growth.
Cybersecurity Is An Essential Element In The Digitalizing Society
Last but not least, cybersecurity is a growing market. More and more companies start to realize that good cybersecurity is essential to their business. With a growing amount of corporate hacks and DDoS attacks companies fear that their business is at danger. Cyber-attacks disrupt big businesses around the world constantly, while many attacks result in silent payments of companies who just want to continue business as usual. A growing share of companies therefore have increased their spending on cybersecurity, especially since a growing share of businesses work largely in digital and online environments. Cybersecurity is an insurance against potential revenue losses from unnecessary disruptions. Palo Alto Networks (NYSE:PANW) is one of the biggest players in the market and like L’Oreal, might just be a little bit too expensive at the moment. The cloud and user-security software of Okta (NASDAQ:OKTA) has proven to be essential in the work-from-home digital environment and is up +70% percent since their March lows. Other growing cybersecurity companies are CrowdStrike Holdings (NASDAQ:CRWD) which is fast-growing but their share price already has major growth priced in. And FireEye (NASDAQ:FEYE) which is relatively cheap but has been struggling to pick up the pace compared to other companies in the sector.
Investing into growth stocks is a relatively risky business, but having a small share of these kind of stocks in your portfolio can boost your growth. As the FED has created a low interest rate environment many of these riskier assets have already seen a risk-on rise in share prices. It will be interesting too see if this latest bull-run can survive the full and long lasting negative effects of the corona crisis. Until then these stocks will continue to outperform and may prove to be outperforming on the long run. However, in a sell-off of markets, these stocks are the first ones to dive. So always stay aware of the financial position of growth stocks, and valuate the risk properly. Just like The Golden Investor, growth stocks need time for growth but some of them eventually may rise exponentially on the long run.
Disclaimer: This is not investment advice or anything like that, always make your own investment decisions based upon your own financial situation