With both the FTSE 100 and the S&P 500 moving higher in November, it’s not the most obvious time to be looking at growth stocks. But I think there are still some interesting opportunities.
A couple of companies have been having a difficult time recently and I’m looking for them to turn the corner. If I’m right, December could be my last chance to buy them at decent prices.
Rentokil Initial
Rentokil Initial (LSE:RTO) shares have been choppy over the last year or so. But I’ve been seeing the declines as a long-term buying opportunity.
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In 2022, the company acquired rival Terminix to boost its presence in the US. Given that this accounts for over half of the global pest control market, this seems like a smart move.
The trouble is, things haven’t worked yet. The expected synergies have taken time to appear and the only thing that has really grown is Rentokil’s debt, which is an ongoing risk.
I think it’s just a matter of time though. And while the firm’s October update was uninspiring overall, the CEO suggested the integration is progressing and results should appear soon.
Since then, the Rentokil share price has climbed almost 20% and a positive update in early 2025 could cause the stock to jump again. If that happens, it might be too late for me.
With the balance sheet carrying a lot of debt, the risk of further delays is significant. But right now, I think the bigger danger for me is missing the long-term opportunity to buy the stock
Five Below
Another opportunity where I think a window might be closing is Five Below (NASDAQ:FIVE). The company has some strong growth prospects, but the stock has fallen badly in 2024.
The big issue has been inflation. As a discount retailer, the firm generates a lot of its revenues from households with annual incomes below $50,000, which are worst-affected by rising prices.
This continues to be the big risk with the business. And the October data indicated that the rate of price increases started to move higher again.
I rate Five Below’s growth prospects though. Its ambition to increase its store count by around 12% a year until 2030 should help it justify its current valuation, even in a tough environment.
Crucially, I think the company can do this without stressing its balance sheet. With new stores breaking even within a year, I expect the firm to be able to grow using cash instead of debt.
The stock’s up 33% from when I started buying it in August though. So while I think there’s still a good opportunity here, I’m looking to take advantage before it goes any higher.
Unusual opportunities
Shares in Rentokil and Five Below aren’t on my watchlist for December – they’re on my buy list. I like both companies, but I think the time to buy the stocks might be running out.
I’m not sure which I think is the better stock to buy at the moment. But fortunately for me, there’s no rule saying I can only choose one of them!
