The end of the year is almost here, but I don’t want to write December off as a month for chilling out completely. In fact, given the move we’ve seen in growth stocks for the majority of the year, I think that now is a great time to pick up some shares. If I had some spare cash at the moment, there are several stocks I’d consider buying.
Why I think now is a great time
Most growth stocks have fallen significantly in 2022. The main reason for this has been investor reluctance to buy these riskier stocks. With interest rates and inflation both rising, people have cut back on discretionary spending. This has forced many growth stocks to cut both revenue and profit forecasts. Given that these types of stocks have valuations based mostly on future potential, it’s logical that the share prices have fallen.
However, I think that the steep fall in growth stocks in general appears to be coming to an end. For example, recession expectations are well built-in to most people’s view for 2023. Unless we get some new catalysts that really cause us to go into a much deeper recession than forecasted, I struggle to see markets tumbling lower.
On that basis, 2023 could see investors pile back into growth shares as they feel more comfortable with the outlook for the global economy.
Growth stocks I’d buy
I’d split £1,500 between two ideas equally. The first one is Amazon. I knew the stock had underperformed this year, but it was only recently when a friend pointed out that the tech giant has halved in value over the past year. As of today, this has improved slightly to being down 47%.
The business is very sensitive to the broader economy. The miss in Q3 earnings was put down to factors including inflationary pressures and a strong US dollar. These components aren’t anything to do with the business offering, including web services and video platform. So, I expect that when the macroeconomic factors ease off next year, the Amazon share price should also lift higher.
A second stock I like is NIO. I wrote about the company a month ago, citing how an eventual reopening of the Chinese economy could support a large move higher in the share price. Even though recent protests in China haven’t yielded anything, I think it’s only a matter of time before restrictions are lifted and the zero-Covid policy is changed.
Granted, the company is still losing money (over $500m net loss in Q3). But the delivery numbers are rising quarter on quarter, despite the supply chain issues this year. I think this bodes well for the stock to rally next year after the 72% drop over the past year.
I don’t have £1,500 to invest right now, but if I did, I’d put that money in the two above ideas.
