I think some of the best stocks to buy now are growth businesses that may be able to profit from the economic recovery over the next few years. And with that in mind, here are two of my favourite growth plays that I would buy for my portfolio today.
Best stocks to buy now
The first company I would buy today is dotDigital (LSE: DOTD). I think this business could provide attractive returns for its investors no matter what the future holds.
It’s engaged in providing software as a service (SaaS) and managed services to digital marketing professionals. This is a market that has been affected by the pandemic, but it has escaped the worst of the downturn. DotDigital’s net income increased by 21% last year.
Analysts believe this trend will continue in 2021. They’ve pencilled in an increase in net profit of around 10% for the period.
However, these are just forecasts at this stage and should be taken with a pinch of salt. The company may perform better or worse than these estimates. They’re only designed to give a rough guide to dotDigital’s potential.
Still, I believe its product has a considerable market. So, no matter what happens over the next 12 months, I think its revenues and net income can grow steadily in the long term.
That being said, the SaaS market is incredibly competitive, and dotDigital is relatively small compared to its large American peers. The most significant risk facing the company is the threat of competition. There’s also the challenge of cybersecurity. A big data leak or hack could seriously impact the company’s reputation.
Nonetheless, I reckon dotDigital could be one of the best stocks to buy now for long-term growth, despite these risks.
Another company I would buy based on its potential to benefit from the global economic recovery over the next few years is actuator manufacturer and flow control company Rotork (LSE: ROR).
The pandemic hit the company’s sales and operating profit last year, but the outlook for the group is improving. Increased economic activity around the world should lead to more demand for industrial equipment, which could be positive for Rotork’s order book. As such, I think an improved economic outlook will lead to better investor sentiment towards the business.
The group still faces headwinds, however. Management does not expect revenues to recover to 2019 levels in 2021. A lot depends on whether or not the global economic recovery does gain traction over the next 12 months. This is far from guaranteed. Another wave of coronavirus could cause a considerable headache for industrial companies like Rotork.
Still, as a way to play the economic recovery, I think this is one of the best stocks to buy now. That’s why I would buy shares in Rotork today while keeping an eye on the risks the business currently faces.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended dotDigital Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.