2022 has been a year characterised by surging inflation. Caused by supply bottlenecks from Covid-19, ultra-low interest rates, and magnified by the Russia-Ukraine crisis, inflation reached 10.1% in the UK in July. Across the Atlantic, the situation was similar, with prices rising 8.7% year on year in July.
With inflation rising, central banks are hiking interest rates. This is placing big pressure on growth stock valuations, as people pull their money out of speculative assets. At historically low prices, I’m looking for bargain growth stocks that could land me some big returns in the future. Below are two stocks I currently have my eye on.
NIO
NIO (NYSE: NIO) is a Chinese electric vehicle manufacturer. It had a standout year in 2020, when its shares climbed over 1,100%. However in 2022, things haven’t been as easy with the shares falling 40% year-to-date. Over 12 months, the shares are down 47%.
The reason I like the look of this stock is due to its remarkable results. In Q1, the firm saw its year-on-year deliveries rising by 29%, with revenues climbing by 24%. Although NIO is still loss-making, its losses shrank 10% compared with the previous quarter, which is a good sign. In 2021, revenues soared by over 122%!
NIO also boasts some market-leading tech when it comes to battery charging. Its cars feature unique battery swapping technology that can be applied in a matter of minutes. Being the only manufacturer to offer this service, I think the stock is well poised to capture market share.
Rolls-Royce
Rolls-Royce (LSE: RR) is a UK-based civil engineering and defence company. It was hit hard by the pandemic in March 2020 and recorded a hefty £4bn loss for that year. However, recently the firm reported a profit for the first time since then, signalling a strong recovery so far in 2022.
Rolls makes the majority of its money from servicing aeroplane engines. With global travel increasing, I think Rolls could be in a great spot for growth this year. In 2020, just 1.8bn travellers boarded planes. Fast forward to 2022, and it’s predicted that 3.5bn customers will board flights. This should help boost revenues so the group can keep delivering profits.
Rolls is also leading the stride in small-to-medium-sized nuclear reactor technology. It expects to receive clearance to roll out these reactors by 2024 and has already signed contracts with governments around the world to implement them.
The caveat
I think that both of these companies exhibit some great fundamentals. However, no matter how these firms perform over the coming year, rising inflation could continue to plague their stock prices. If this is the case, then they could fall even lower – regardless of their encouraging results. However, adopting a long-term view, I think these stocks could be great additions to my portfolio at their current prices.
