2 growth stocks that are ONLY for long-term investors

Growth stocks can be great investments. But investors often need to wait a long time before they find out if they’ve made the right decision. 

| 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.

Long-term vs short-term investing concept on a staircase

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Warren Buffett attributes the success of his Coca-Cola and American Express investments to the fact the companies have grown, not the dividends they’ve paid. In other words: growth stocks can be great.

The trouble is, a lot of businesses need time to increase their earnings. And I think some of the best growth stocks should only be considered by investors with a long-term focus. 

Halma

Over the last 12 months, Halma (LSE:HLMA) shares have climbed 27%. That’s a great return, but I don’t think investors should bet on something similar happening again in 2025. 

Should you invest £1,000 in Halma Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Halma Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3Halma Plc PriceZoom1M3M6MYTD1Y5Y10YALL16 Jan 202016 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024www.fool.co.uk

The stock currently trades at a price-to-earnings (P/E) ratio of 36 (or 31 based on the firm’s adjusted figures). And the company isn’t Nvidia – it’s not likely to double its profits in the next year.

I think, however, that its long-term prospects are enough to justify the current share price. Halma’s strategy involves buying other businesses and integrating them into its network. 

Typical acquisition targets occupy dominant positions in niche markets, making them difficult to disrupt. But it can also mean their scope for growth is limited and this is a risk given the high share price. 

Halma can generate some growth by integrating subsidiaries into its ecosystem. Ultimately, though, the success of the business is going to come down to the firm finding enough companies to buy. 

Management reported a strong acquisition pipeline in the firm’s latest trading update. I think the stock could turn out to be a great investment, but it’s not going to happen overnight. 

Palantir

Palantir (NASDAQ:PLTR) is a very different case. I think there’s a decent chance the firm’s profits may double in the next 12 months, but at a P/E ratio of 345, the stock will look expensive even if they do.

Created with Highcharts 11.4.3Palantir Technologies PriceZoom1M3M6MYTD1Y5Y10YALL16 Jan 202016 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024www.fool.co.uk

Historically, the company has relied heavily on government contracts. And with these continue to make up a big part of revenues, there’s an ongoing risk of policy changes and budget shifts. 

Recently, though, Palantir has shifted to targeting businesses to sell to, and the early signs are encouraging. It seems as though companies can’t sign up fast enough when they see what Palantir can do.

Whether it’s bottled water or agricultural software, the firm’s analytics products appear to be able to generate impressive insights for their clients. And I think this is very promising. 

There’s a lot of optimism about what artificial intelligence (AI) might mean for various businesses. But Palantir is one of the few companies that actually has a working AI product that produces real results.

It’s going to be a long time before the firm is in a position to return cash to shareholders in a way that amounts to a good return on the current share price. I think, though, that patience could pay off here.

Long-term investing

Unless they fall sharply, neither Halma nor Palantir stock is going to look cheap in the next couple of years. And while anything can happen, I don’t think investors should look for a return in that time.

Over the long term, however, both companies have outstanding growth prospects. There are risks in both cases, but I think either stock could turn out to be a great investment at today’s prices.

Should you invest £1,000 in Halma Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Halma Plc made the list?

See the 6 stocks

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.

American Express is an advertising partner of Motley Fool Money. Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma Plc and Nvidia. 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

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »