I’m always on the lookout for growth shares to buy for my portfolio. Here are three I would consider this month.
Lab instrument specialist: Judges Scientific
I reckon scientific instrument manufacturer Judges Scientific (LSE: JDG) could continue its impressive record of long-term growth.
The company’s approach is simple. It buys up instrument makers, using a disciplined approach to valuation to avoid overpaying. The benefits of being part of a larger company can allow such subsidiaries room to grow and extra financial flexibility. But head office doesn’t interfere too much with operations. As precision is important in scientific instruments, customers are willing to pay a premium for quality products. That gives Judges pricing power and has allowed it to raise its dividend by double digits for a few years in a row.
There are risks, though. For example, sustained lab closures in some markets could dent revenues and profits over the next couple of years.
International sportswear retailer: JD Sports
While JD Sports (LSE: JD) may seem like a homegrown success story, much of its recent growth trajectory is down to its international expansion. That builds on what the retail giant has learnt in four decades of operation. It is expert at identifying customer needs, buying the right assortment of products, and merchandising them well.
That shows through in JD’s performance. Its blockbuster interim results – which saw the company’s best ever half-year profits – suggest that the growth trajectory continues. But it isn’t all smooth sailing. For example, if logistics problems continue, they could hurt growth and profits to boot. Over the long term, however, I continue to see substantial opportunities for growth. I think that could propel the JD Sports share price to new highs.
Established drinks maker: Diageo
Looking at drinks trends in recent years, from the popularity of niche premium spirits to a growing interest in alcohol-free alternatives, one company that seems to benefit from many of them is manufacturer Diageo (LSE: DGE). With premium spirits brands like Aviator Gin, teetotal tipple Seedlip, and massive premium brands like Johnnie Walker, the company is a powerhouse in the lucrative drinks market.
It isn’t resting on its laurels, as the huge new Johnnie Walker whisky centre on Edinburgh’s Princes Street shows. I expect continued growth in coming years. That will hopefully come from a combination of careful brand stewardship, customer demand for premium drinks and pricing power. But there are risks here too. Seedlip might not be enough to protect the company’s revenues from a growing tendency among younger drinkers to shun alcohol.
Growth shares to buy and hold
High-quality growth shares can be expensive. These three shares aren’t cheap based on a price-to-earnings valuation. Share price performance in any given period could be hurt by weak results. Over the long term, however, I reckon their high-quality operations in different fields can support both revenue and profit growth. I would happily add all three to my portfolio this month.
Christopher Ruane has no position in any shares mentioned. The Motley Fool UK has recommended Diageo and Judges Scientific. 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.