)The stock market has been hard to watch so far in 2022. After a dramatic run in 2021, the S&P 500 has given up more than 20% of its value by mid June 2022, and all signs point to more of the same. The geopolitical stage is rocky, to say the least, inflation is rocketing, and the Federal Reserve is working toward monetary tightening.
None of that is good for Wall Street.
If you’re following the growth investment strategy, chances are you’re one of the hardest hit. But are there any growth companies that represent a strong investment opportunity right now?
We dug around and found five growth stocks that have the potential to generate significant long-run gains, regardless of the current state of the economy and overall market.
Best Growth Stocks to Buy Right Now
The vast majority of growth stocks are tech stocks. However, there is one in the health care sector that we found to be one of the best growth stocks in the space.
The stock picks below were chosen for a mix of strong analyst expectations, growth potential, and what Warren Buffett likes to call an economic moat. Read on for our picks for the best growth stocks to invest in.
1. Vertex Pharmaceuticals (NASDAQ: VRTX)
Best for year-to-date (YTD) performance.
- Performance: VRTX is up more than 21% year-to-date (YTD). Investors have also enjoyed more than 29% gains over the past year and more than 125% gains over the past five years.
- Earnings: The company has beat earnings expectations in the three of the past four quarters. In the most recent quarter, VRTX produced earnings per share (EPS) of $3.16.
- Price Target: The current average price target of $290.58 represents the potential for more than 7% growth over the next year.
Vertex Pharmaceuticals is a biotechnology company that takes a unique approach to the development of new medications for serious and often life-threatening medical conditions. The company was the first to develop a treatment for the underlying cause of cystic fibrosis (CF) and now has multiple medicines on the market to combat the condition.
It’s also the only company on this list with a stock price in the green so far this year.
Moving forward, Vertex investors have plenty to look forward to, even in the face of a potential economic recession. Some key benefits to investing in the stock in the face of tough economic times include:
- In the Health Care Sector. Vertex Pharmaceuticals has become a major player in the health care industry with its CF therapeutics. Health care is one of the areas consumers are less likely to cut when economic concerns arise.
- Economic Moat. Vertex Pharmaceuticals largely controls the CF treatment industry and is likely to do so for quite some time. The company has impressive intellectual property that protects its assets for more than a decade into the future.
- Promising Pipeline. Vertex made its name with its CF franchise. However, exclusivity doesn’t last forever in biotechnology, and the company knows it. The company has a pipeline targeting eight serious conditions ranging from diabetes to chronic pain, and research has been promising to date.
Aside from the company’s CF franchise, VRTX has a pain management product that could change the way physicians treat even the most serious pain. The candidate is known as VX-548, and although it’s in the early stages of development, it could quickly become the company’s next big hit.
VX-548 works by inhibiting the NaV 1.8 protein, which lives on nerve cells and is partly responsible for sending pain signals to the brain. In recent clinical studies, this non-opioid pain treatment produced better results than opioid-derived treatments in patients after tummy tuck and bunion surgeries.
That’s great news considering the state of the opioid epidemic in the United States and around the world.
Moving forward, Vertex is expected to continue to produce rapid growth in revenue and earnings thanks to its CF franchise, and its promising pipeline is icing on the cake. Maybe that’s why there are no Sell ratings on the stock.
2. Apple (NASDAQ: AAPL)
Best for long-term investors.
- Performance: Apple has given up more than 22% YTD. The stock is up nearly 11% over the past year and more than 265% over the past five years.
- Earnings: Apple has beaten earnings expectations in three of the past four quarters. There was one quarter the company came in line with analyst expectations. The company produced earnings of $1.52 per share in the most recent quarter.
- Price Target: The average price target on the stock is $187.12, representing more than 30% growth potential over the next year.
Apple has had a rough start to the 2022 year. The stock is down more than 20%, and investors feel like the sky’s falling. The company has been hit with supply chain issues and rising input costs since the start of the COVID-19 pandemic, and with a potential economic recession on the horizon, investors have the right to be concerned.
However, the stock remains a long-term member of Warren Buffett’s portfolio, and for good reason.
The company’s business model has been tried and tested through the years and continues to stand tall, leading to more than $100 billion in free cash flow in 2021 alone. According to Statista, nearly 47% of Americans own an iPhone.
Now that’s what I call dominance.
But smartphones aren’t the only place Apple has meaningful market share. The company also controls more than 30% of the personal tablet market and more than 8% of the personal computer market in the United States, and it continues to grow its share of all three of these markets year after year.
The company also breaks the mold in terms of dividends. After all, neither tech stocks nor growth stocks are usually considered dividend stocks. Apple lives in both categories and pays a 0.65% dividend yield. Sure, that yield won’t turn any heads, but it’s definitely icing on a pretty delicious cake.
To put it simply, Apple is one of the companies most often found in exchange-traded fund (ETF) portfolios, and it likely has a place in yours.
3. Amazon.com (NASDAQ: AMZN)
Best for banking on increasing profit margins.
- Performance: Amazon.com shares have lost more than 37% of their value so far this year. The stock is down more than 34% over the past year and up more than 115% over the past five years.
- Earnings: Amazon.com has beat analysts’ earnings expectations in two out of the past four quarters. The net earnings surprise over the past four quarters is 132.38%.
- Price Target: The average price target on AMZN is $3,647.08, representing the potential for more than 70% gains over the next year.
Amazon.com is an e-commerce giant, dominating with its 41% of the U.S. market according to Statista. The company has one of the strongest balance sheets on the market. AMZN makes its way into a great many top stock lists, regardless of the type of stock you’re looking for, because it has so many subsidiaries.
To make things even better, declines over the past year have brought Amazon shares to a more reasonable valuation.
There’s no question that Amazon.com is a leader in e-commerce, but its Amazon Web Services (AWS) business is becoming just as important. Thanks to the company’s cloud computing solutions, it has increased its margins dramatically in recent quarters and is expected to continue to do so.
That’s because the company has a gross margin of around 80% and its operating profit sits at 57%. To put that into perspective, the company’s overall gross margin is just over 30% and its profit margin is under 5%.
As AWS continues to grow, the company’s already impressive fundamentals are only going to get better.
4. DocuSign (NASDAQ: DOCU)
Best for value and growth.
- Performance: DocuSign is down 49.88% YTD and has lost $59.78% over the past year. The stock has gained nearly 100% over the past five years.
- Earnings: DocuSign currently operates in the red, although the company has beaten analyst expectations in two of the past four quarters. The company reported a loss of $0.11 per share in the most recent quarter.
- Price Target: The average price target on DOCU is $101.14, representing the potential for more than 28% gains over the next year.
Recent volatility hasn’t been friendly to DocuSign. The stock has experienced one of the biggest losses of the year so far. However, there’s a strong argument that the stock is poised for a rebound.
There’s no question that the recent pain pushed the company into value stock territory, but that’s not the big reason to buy the stock. The big reason is the coming growth.
DocuSign is a digital document signing and sharing company that experienced significant growth throughout the COVID-19 pandemic. When you sign documents online using the platform, those documents are tracked, traced, and stand up in a court of law if the need arises. But the pandemic’s over, so where’s the growth coming from?
The answer is Zoom.
Yes, Zoom is a completely different company. It’s the leading platform for video conferencing and it has nothing to do with DocuSign for the most part. That is, with the exception of a recent agreement signed by both companies.
Under the agreement, the two companies plan to roll out features that make sharing documents even easier. Soon, Zoom users will be able to send other video participants digital documents to sign using DocuSign technology. That’s big news for DocuSign for two reasons:
- Directly Increase Sales. DocuSign can expect a significant increase in sales as Zoom users sign up for the service to take advantage of the new features.
- Free Advertising. Even Zoom members who don’t use DocuSign on the platform will be more likely to sign up for the service for other uses. Keep in mind that Zoom has 300 million active users. At an average rate of $10 per thousand views, that works out to $3 million in free advertising if every user only sees the DocuSign logo once.
Simply put, the agreement with Zoom can put DocuSign back on the growth trajectory.
5. Sea Limited (NYSE: SE)
Best for strong fundamentals.
- Performance: SE shares have lost more than 65% YTD and more than 69% over the past year. The stock has climbed more than 370% over the past five years.
- Earnings: Sea Limited doesn’t produce profits yet, but it has beaten analyst expectations in the past two consecutive quarters.
- Price Target: The average price target on the stock is $158.10, representing the potential for more than 100% gains.
Sea Limited is the least-known company on this list, but it may be the biggest opportunity too. The company started as a game developer and has grown to become a tech conglomerate operating in areas like gaming, publishing, and media. Sea’s revenue growth has been nothing short of spectacular. Revenues were up 64.4% in the last fiscal year, with e-commerce revenue doubling in the quarter.
So, why the pain in the share price?
Firstly, the market hasn’t been too friendly toward growth stocks, but admittedly, there’s more to it. The declines are a reaction to the company pulling its Shopee e-commerce brand from India, France, and a few other countries.
However, the move didn’t prove harmful to Sea’s bottom line as revenue continues to grow at lightning speed, and even the Shopee brand is producing impressive results. Gross orders climbed by 71%, and gross merchandise value climbed by 39%.
All of this combines to say one thing. The declines in SE’s share price are likely a buying opportunity. Maybe that’s why 17 out of 20 analysts rate the stock a Buy and the other three rate it a Hold. There aren’t any sell ratings, further validating this high-growth opportunity.
Growth stocks are a dime a dozen in bull markets, but as the market continues to retreat, these opportunities are becoming harder and harder to find. The stocks mentioned above may have experienced pain at the beginning of 2022, but they have some of the best chances of regaining a growth trajectory in the mid- and long-term.
As is always the case, you shouldn’t take my word for it or the word of any expert. Always do your own research to get to know the companies you’re buying before you invest.
Disclaimer: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.