James Anderson knows a thing or two about growth investing in the stock market. From 2000 to 2022, he managed Scottish Mortgage Investment Trust, unearthing gems including ASML, Tesla, and Nvidia. Savvy picks like these propelled the trust into the FTSE 100 in 2017.
Nowadays, he helps run Lingotto Innovation, a growth-focused strategy that similarly attempts to find massive stock market winners. In May, Anderson and co-manager Morgan Samet spoke to Barron’s. In this interview, they highlighted three stocks they’re very excited about over the next decade.
EVs
Let’s start with the most familiar, BYD (OTC:BYDD.F). This is the Chinese hybrid and electric vehicle (EV) maker that’s now outselling Tesla. Last year, BYD’s revenue grew 29%, toping $100bn for the first time ($107bn). Its affordable EVs are selling like hotcakes worldwide, and I’ve been seeing more of its cars on UK roads.
Anderson highlights BYD’s “deep commitment to science” as a competitive advantage. The firm designs and manufactures its own batteries. Indeed, as the world’s second-largest player, it sells EV batteries to others, generating a sizeable revenue stream beyond cars.
The stock’s up nearly 400% in five years, giving the business a chunky market-cap of $135bn. However, the forward price-to-earnings ratio of 17.5 looks reasonable, especially compared to Tesla’s 175.
Naturally, the global EV market’s extremely competitive, which adds risk. And the US and EU are likely to keep tariffs high to protect their own car industries from cheap Chinese imports. I’m less interested here.
Driverless trucks
To my mind, the next stock has a lot more explosive potential. This is Aurora Innovation (NASDAQ: AUR), a leading autonomous trucking company.
Uber-backed Aurora is working with industry heavyweights like Continental, Toyota, and Volvo Trucks. So it’s not trying to replace traditional trucking companies, but integrate its autonomous software/hardware systems into vehicles.
Now, the challenges here are obvious. “Trucks go faster, they carry heavier materials, there is more regulation, and companies operate across state lines“, Samet points out in the article. One motorway accident could be devastating for all involved, including Aurora shareholders.
However, the ability to operate driverless would deliver massive savings for the industry. In May, Aurora launched autonomous truck runs between Dallas and Houston, a route that has now surpassed 20,000 miles.
Priced at $5.70, the stock’s down 41% since going public in 2021.
AI diagnostics
The third stock’s Tempus AI (NASDAQ: TEM). The company uses artificial intelligence (AI) and a vast library of clinical data to help physicians make personalised treatment decisions for patients, particularly those with cancer.
The company does genomic sequencing tests, while its Tempus One tool functions as a generative AI clinical assistant. Over 50% of US oncologists are now connected to Tempus.
For me, this is the most interesting because it’s only slightly larger than Aurora with a $12.5bn market-cap, but is far more advanced commercially. While Aurora isn’t forecast to generate $1bn+ in revenue until 2029, Tempus is on course for $1.3bn this year.
The main risk is that Tempus is still loss-making. But it’s nearing profitability while growing strongly (20%+ revenue growth forecast till at least 2028).
Undoubtedly, these two last picks are high-risk, high-reward. For adventurous investors though, I think Tempus may be worth exploring further.
