When things get choppy in the stock market, share prices can fall dramatically. And this can be especially true of growth stocks, where returns are some way in the future.
I think this has been the case recently. There are a few shares that I see having become much more attractive since the start of the year – and I think investors should add them to their watchlists.
Judges Scientific
Judges Scientific (LSE:JDG) is a great example of the kind of stock I have in mind. It’s down 20% since the start of the year and it’s reached a level where I’ve actually started buying it for my portfolio.
The scientific equipment conglomerate has a market cap of £475m and generates around £16m in free cash. That’s around a 3.1% return, but I’m not interested in this one for the instant returns.
The company looks attractive because it has a lot of scope for future growth. Primarily, I expect this to be driven by acquiring other businesses – which is something it has done very successfully in the past.
This can be risky – the danger of overpaying for an acquisition is real. But the lower the share price goes, the more I think investors have a margin of safety against this possibility.
Tristel
Another growth stock I think looks attractive at the moment is Tristel (LSE:TSTL). This is also stock I’ve been buying recently and it’s one investors should consider it too.
The stock is down almost 25% since the start of the year, but it could be on the verge of something important. The medical disinfectant company is in the process of expanding into the US market.
This won’t necessarily be straightforward. Tristel’s products command a premium price and this means there’s a risk that hospitals might be reluctant to move away from existing solutions.
The firm, however, has had some success with its wipes for ultrasound and it’s expecting approval for its ophthalmology solution this year. Over time, I think this could generate some significant growth.
Five Below
The S&P 500 might be in correction territory, but the US stock catching my eye at the moment is Five Below (NASDAQ:FIVE). It’s a discount retailer that I think has some exciting prospects.
The company is hoping to reach 3,500 outlets, which is roughly double its current number. If it can do this, I expect a big boost to profits, but there are some potential challenges ahead.
One of these is inflation. This is particularly relevant in the US at the moment and could mean consumer spending taking a hit, causing Five Below’s growth to come in slower than expected.
I think, however, that this is reflected in the share price. The stock trades at a price-to-earnings (P/E) ratio of 14, which isn’t what someone might expect to see from a company with big growth opportunities.
Off the beaten track
The stocks I’ve mentioned here aren’t ones that typically get a lot of attention. But I’m a firm believer in the idea that the best opportunities are often found in places where other investors aren’t looking.
Until recently, Judges Scientific, Tristel, and Five Below had all been fairly expensive. With share prices falling, however, I think investors should add them to their watchlists.
