Growth stocks have been hit hard in recent months. The year started with the tech sell-off and growth stocks have been hammered further by soaring inflation and interest rate rises. Higher interest rates can increase the cost of growth as borrowing costs go up. It can also cause firms to put expansion plans on hold.
There’s more too. Amid higher inflation and interest rates, investors will incentivise returns in the short term rather than the long run. As such, I have been increasingly looking at stocks offering dividend yields over shares that have growth potential.
However, I’ve still been keeping an eye on stocks with plenty of upside potential. Here are some of the stocks I’m considering adding to my portfolio in May.
Yalla Group
Investors in Yalla Group have endured a tough year. The company’s share price has tumbled and is now trading at $4.11 a piece, down sharply from highs of $39 last February. The rise came on the back of impressive revenue growth during the pandemic, but growth has turned negative in recent months. Yalla will need to show evidence that it can get growth back on track. It has an ambitious growth plan and enough cash to push forward.
For a tech stock, Yalla’s price-to-earnings ratio of around 10 makes it look pretty cheap to me.
Netflix
The growth of subscription streaming services over the last decade has been immense. However, Netflix‘s most recent trading update wasn’t a positive one. The report showed that subscribers are leaving Netflix’s streaming services in record levels. Amid headlines suggested that it isn’t growing anymore, investors rushed for the exits. The stock subsequently fell 40% in a single day.
Currently the streaming giant is trading nearly 70% below November’s all-time highs. Yet despite a record number of subscribers leaving, Netflix remains very profitable. At current prices, I’m considering adding Netflix to my portfolio.
Spire Healthcare
I’m backing this private hospital operator to benefit from record waiting lists in the UK. Spire Healthcare saw revenues rise 20% in 2021 and I think this growth will continue. Currently, in England alone, there are more than 6.1 million people waiting on elective procedures. There’s considerable political will to reduce the waiting list and I think private healthcare providers stand to profit. The firm also said there may be further upside in 2022 if Covid-19 prevalence falls, leading to fewer cancellations and staff absences. Of course, there’s still the risk that a resurgent virus could hamper operations and the company’s profitability.
Bank of Georgia
For me, the Bank of Georgia is a growth stock to hold for the long run, but I think it’s always been undervalued. It has a price-to-earnings ratio of just 3.4. Prior to Russia’s invasion of Ukraine, its P/E ratio was below five. Georgian stocks fell when Russia invaded Ukraine — both are significant trading partners for the former soviet republic. City brokers think the bank’s earnings will continue to grow in the coming years. Brokers predict annual profits will rise 10% and 13% in 2022 and 2023, respectively.
Georgia is considered a risky place to invest. And Russia’s increasing assertiveness has reiterated that. But in the long run, I think Georgia is attractive, with successive governments putting market-based principles at the centre of a long-term economic strategy.
