2 quality growth stocks I’m looking to buy in December

Stephen Wright thinks two growth stocks could be great investments for 2024. One is a FTSE 100 conglomerate, the other is Warren Buffett’s company.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shot of a young Black woman doing some paperwork in a modern office

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I think growth stocks can be great investments for tough times. Companies that can keep increasing their earnings through difficult economic conditions are highly valuable.

With a potentially challenging year coming up in 2024, I’m setting my sights on growth stocks in December. And two in particular stand out to me.

Berkshire Hathaway

Berkshire Hathaway (NYSE:BRK.B) is sort of cross between a growth stock and a value stock. The company is relentlessly focused on increasing earnings per share, but the stock isn’t wildly expensive at today’s prices.

I think that means investors get the best of both worlds – a company that is likely to be worth more in future than it is today at a price that means there’s a decent chance of a good return. That’s an attractive combination for me.

Berkshire aims to generate growth through a combination of investments – into existing businesses as well as to acquire new ones – and share buybacks. This combination has pushed the stock up 75% over the last five years.

One risk that the company itself acknowledges is its reliance on Warren Buffett. Following the loss of Charlie Munger earlier this week, this risk has probably increased.

The firm also notes, though, that it has a plan in place to manage the effect of Buffett becoming unavailable (for whatever reason). And the diversified and decentralised nature of its operations further help limit this risk.

Otherwise, Berkshire’s strong balance sheet mean it’s highly unlikely to get into financial trouble. And its size allows it to take advantage of opportunities that aren’t available to smaller businesses.

Moving forward, I expect the company’s growth to be steady, rather than spectacular. But I also think it’s going to be highly reliable, which is what I look for in a stock to buy.

Halma

Halma (LSE:HLMA) is a much more traditional growth stock. It grows much more quickly than Berkshire Hathaway, but also trades at a higher price-to-earnings (P/E) multiple. 

The company’s main strategies involve acquiring other businesses and helping them operate more efficiently. And it has a good track record of doing this, having grown revenues at an average of 10% per year for the last decade.

Earlier this year, a combination of supply chain issues and inventory levels caused the company’s cash conversion ratio to waver. This sent the Halma share price lower and it’s still below where it was at the beginning of January.

The most recent news, however, is much more encouraging. Last month’s update indicated that cash conversion had returned to its previous – extremely impressive – 96% levels.

Halma’s strategy of growth by acquisition can be risky. There’s a constant pressure to find new opportunities and an inherent danger of overpaying for a business, leading to poor returns.

With a market cap of around £8bn, though, the firm is unlikely to find itself short of opportunities any time soon. And the business has shown itself to be disciplined in its strategy in the past.

At a P/E ratio of 34, Halma shares don’t look cheap. But I think the company has a good chance to grow into its valuation, which is why I’m looking to buy the stock before it gets back to where it was at the start of the year.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in Berkshire Hathaway. The Motley Fool UK has recommended Halma Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

2 recession-resistant UK stocks I’d buy and hold for a decade!

Our writer details two UK stocks she believes could still continue to perform well in a recession and not feel…

Read more »

Back view of blue NIO EP9 electric vehicle
Investing Articles

Down 31% this year! Is now the moment to buy NIO stock?

NIO stock has moved sharply downwards in the past couple of months. Christopher Ruane likes the business potential -- but…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 dividend stocks I reckon could grow payouts for years to come!

This Fool is looking for dividend stocks and explains why these two picks could be primed to grow their payouts…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Should I buy, sell, or hold my Rolls-Royce shares at £3.50?

This Fool considers what he should do with his Rolls-Royce shares following the FTSE 100 company's excellent full-year results last…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Are these expensive FTSE 100 stocks actually brilliant bargains?

Paul Summers takes a closer look at two FTSE 100 stocks that could recover strongly in time, despite already carrying…

Read more »

Investing Articles

What might the recent Aviva share price performance tell me as an investor?

Christopher Ruane looks at how the Aviva share price has performed over the past 12 months and considers whether he…

Read more »

Investing Articles

Down by a quarter, is the BT share price a steal?

The BT share price has more than halved in the past five years. What is holding it down -- and…

Read more »