Is growth investing in fashion or not? Recent tumbles in the prices of some growth stocks may suggest not. That does not bother me. My investing approach is all about snapping up some shares in great companies when I think they are attractively priced. If falling prices let me do that, I do not mind being unfashionable!
Here are three companies on my buy list right now for when I have spare funds to invest.
Alphabet
It is not often that a company name enters people’s everyday vocabulary. But that is exactly what Google has managed in less than three decades.
As an investor I think there is a lot to like about Google and other businesses owned by parent company Alphabet (NASDAQ: GOOG). The firm has a large installed customer base that could help it make big profits far into the future. It owns iconic brands that help it attract and retain customers. The business also has a well-honed advertising model generating massive revenues.
Despite that, the Alphabet share price has crashed a third in the past year.
That reflects risks to the business, such as an advertising downturn hurting sales and profits. But I think the long-term investment case remains sound and I see the current valuation as attractive. If I had spare cash to invest, Alphabet is among the growth stocks I would buy for my portfolio.
Zoom
Another big faller in the past year is video call provider Zoom (NASDAQ: ZM). Zoom stock trades 68% lower than a year ago.
Despite that it still has a heady price-to-earnings ratio of 26. That is higher than I would normally like when buying shares. But I think Zoom may merit this valuation as it has some real strengths, from a large installed customer base familiar with its technology to a scalable business model. Those could help boost profits significantly in future.
The risks here include competition from large rivals like Microsoft. But Zoom’s narrow focus could help it cement its leading position for video calls. It is growing its base of large users, with the number of customers spending more than $100,000 per year with Zoom growing by 37% in the most recent quarter compared to one year previously.
JD Sports
I continue to own a stake in JD Sports (LSE: JD). The shares have halved in the past year so I can buy two now for the price of one 12 months ago. If I had spare cash to invest I would do just that.
The company has a proven retail formula. Last year saw record revenue and pre-tax profits. Sales in the first half of this year grew 14% compared to the same period last year, at the same gross profit margin.
Interim pre-tax profit fell, though, from £365m last time to £298m. That points to one of the risks facing JD: higher costs eating into its net profit margins. This proven operator remains highly profitable, nonetheless. I am hopeful it can grow profits again in future, alongside sales.
