With the Middle East situation on a knife-edge, most growth stocks have sold off aggressively recently. This is entirely understandable, of course, because rising inflation could squeeze businesses both operationally and through weaker consumer demand.
However, in some cases, the sell-off just gives investors an opportunity to buy high-quality growth stocks at discounted levels. Here are two that I like today.
On Holding
The first stock is On Holding (NYSE:ONON). This is the Swiss running shoe and sports clothing brand that has defied the gloomy consumer spending environment, even while charging premium prices.
Between 2020 and 2025, sales surged from the Swiss franc-equivalent of $453m to $3.8bn. Profit margins have also expanded and are now industry-leading due to the firm’s premium pricing power. On’s gross profit margin is 63.9% versus 51.6% for Adidas and 42.7% for Nike.
But are the years of heady growth about to come to an end?
Well, net sales on a constant currency basis are expected to be at least 23% this year. Given the current backdrop, that would normally be considered fantastic for a sports brand. But coming off the back of 35.6% growth last year, this deceleration has disappointed Wall Street.
Beyond slowing growth, there could be some margin pressure this year from increased marketing spend, currency fluctuations, and tariffs.
Meanwhile, in an unexpected change in the C-suite this week, On announced that two co-founders would take over as co-CEOs. So this has created more uncertainty.
The stock’s down 30% year to date. Based on 2027 forecasts, On is now trading at 17.5 times forward earnings, translating into a price-to-earnings-to-growth (PEG) ratio of 0.75. Remember, anything below one is seen as potentially undervalued.
Longer term, I’m still bullish here. On was founded on the “principle of relentless innovation“, and we can see this in its CloudTec cushioned trainers and LightSpray manufacturing process, which makes laceless, robot-sprayed super-trainers in three minutes.
Apparel sales jumped 68.2% last year, but there’s a blue-sky opportunity to sell far more clothes. And On is a rare Western brand enjoying surging sales across Asia Pacific, its fastest-growing region.
Earlier this week, I took advantage of the dip and bought more shares.
3i Group
Turning to the FTSE 100 now, we have private equity firm 3i Group (LSE:III). The share price has fallen off a cliff — down 30% in a month and 47% since October.
The catalyst for this has been Action, the Dutch discount retailer that makes up a whopping 70% or so of 3i’s assets. Not content with its 3,300+ stores across 14 European countries, Action will enter the hyper-competitive US market by the end of 2027 or early 2028.
Now, this expansion will obviously need a fair bit of capital, and isn’t guaranteed to pay off. North American has long been a graveyard for European retailers — ask Tesco and Marks and Spencer.
A few months back, 3i stock was overvalued, trading at a wild premium to its underlying net asset value (NAV) per share. But after crashing back down to earth, it has swung to a double-digit discount.
I think that’s very attractive for this high-quality business, which has a fantastic track record of buying, building, and selling unlisted businesses.
Now carrying a 3.4% dividend yield, the stock’s well worth considering while it’s under 2,400p.
