Growth stocks exist to provide investors with the opportunity to multiply their money by large amounts. Of course, as many have been recently reminded, these enterprises typically come with significantly more risk and volatility.
Other than a few exceptions, this class of equities remain largely unpopular due to the continued economic uncertainty. However, consequently, that means potentially explosive investments are currently trading at discounted prices versus their historical premium valuations.
With that in mind, here are two stocks from my portfolio I’ve been topping up throughout 2023, so far.
Investing in the future of surgery
While it still sounds like something out of a science fiction novel, robotic surgery is becoming increasingly common in medical institutions worldwide.
These procedures are still largely more expensive to perform versus traditional methods. But this price barrier has been falling rapidly over the last decade. And with the pinpoint precision provided, patients take on less risk with faster recovery times. That means better quality healthcare while simultaneously reducing costs for hospitals.
That’s why Intuitive Surgical (NASDAQ:ISRG) is one of the larger positions within my growth portfolio. The company is the global leader in this rising industry, with 8,042 of its da Vinci surgical systems installed worldwide.
With hundreds of new systems installed every quarter, Intuitive now controls an estimated 80% of the global robotic surgery market. In other words, it has a near monopoly in an industry which, according to Grand View Research, is on track to expand by 16.5% annually between now and 2030.
Of course, no investment is without its risks. The high barriers to entry mean competition is currently scarce. But that won’t last forever. And if management can’t convince health insurance companies to include robotic surgery procedures in customer policies, growth may struggle to keep up with expectations.
Nevertheless, given the group’s explosive track record, I think these risks are worth taking.
Powering the cloud
Data centres have been money-making machines for cloud providers worldwide. But cloud technology wouldn’t exist today if it wasn’t for firms like Arista Networks (NYSE:ANET). Most consumers probably haven’t heard of this enterprise. But chances are they’ve relied on a server using the group’s tech.
Arista makes high-speed ethernet switches. These are ultimately responsible for the flow of traffic moving through servers, creating the world’s increasingly critical bandwidth. And while this sector has been historically dominated by the likes of Cisco, Arista has been systematically stealing market share for decades. And this trend looks set to continue.
At the end of 2022, the company launched its first 800 gigabit switch. It has double the bandwidth capacity of the group’s earlier generation, with an estimated 20-40% saving in electricity consumption. Apart from saving data centres considerable running costs, such performance will be critical for low-latency services from IoT, 5G, and AI devices.
With a focus on hyperscaler data centres, Arista has achieved tremendous growth. But that has also led to some serious customer concentration risk, with Microsoft and Meta Platforms responsible for 42% of the revenue stream! If either of these firms decides to switch to a competitor, it could be disastrous.
Having said that, even Cisco is seemingly struggling to keep up with Arista’s impressive pace of technological innovation. Therefore, while certainly risky, it remains a growth stock worth buying, in my opinion.
