The Motley Fool

This FTSE 100 giant isn’t the only growth stock I’ve started buying

Image source: Getty Images

Here at the Fool UK, we think investors should regard the recent market crash as an opportunity. That said, we also think it shouldn’t be used as an excuse to buy any old tat.

If you’re going to dip your toe into choppy waters and invest for the long term, you may as well focus on quality growth stocks.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

This is what I think (hope) I’ve done with two new additions to my own portfolio this month. Drum roll, please…

Market leader

Some might baulk at my decision to begin building a stake in property portal Rightmove (LSE: RMV). After all, the housing market has pretty much collapsed since the outbreak of the coronavirus outbreak and could struggle to bounce back in its aftermath.

So, what’s got me buying? There are a few reasons.

First, FTSE 100 constituent Rightmove is the undisputed market leader in what it does. For many, it is the housing market. All attempts by competitors to snatch user eyeballs to date have failed. That’s the sort of economic moat I look for.

Second, this is a company that generates staggeringly high returns on capital employed (ROCE). This is the amount of profit it makes relative to the money it invests in the business.

For fund managers like Terry Smith, ROCE is one of the key metrics to look for when ascertaining whether it’s worth buying a particular growth stock. And he’s not done too badly with this strategy

Third, Rightmove has a great balance sheet with £24m net cash at the end of 2019. The recent decision to withdraw the final dividend will help bolster things further.

Fourth, Rightmove’s share price — at the time of writing — is 30% down from where it peaked in February. While anchoring to a historic price should be avoided, I suspect a fair bit of negativity is already priced in. 

But might the shares continue falling? Absolutely! And it’s for this reason I’ve only put a very small amount of my capital to work for now.

Another top growth stock

A second company I’ve started buying in April shares a lot of Rightmove’s characteristics and attractions. It’s an online business with a great brand, high returns on capital and stonking margins. Unlike Rightmove, however, this company’s services are popular with those looking to save rather than spend money.

Step forward price comparison specialist Moneysupermarket.com (LSE: MONY). If we truly are heading for the mother of all recessions then I think it likely traffic to the FTSE 250 member’s site will only increase.

People will still need to renew contracts and policies in tough times, but they’ll be more motivated than ever to do so as cheaply as possible. While dependent on what providers, such as banks and insurance companies, are willing to offer consumers, the firm’s multiple revenue streams should also give it some protection, even if some products are withdrawn. 

Like Rightmove, Moneysupermarket’s finances look steady. The company had net cash of £30m at the end of March and has decided to go ahead with paying its final dividend for last year.

Again, I’ve only bought a small slice for now. But I’ll definitely be looking to add more if (and that’s a sizeable ‘IF’) markets sink back to levels seen in March

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Paul Summers owns shares in Moneysupermarket.com and Rightmove. The Motley Fool UK has recommended Moneysupermarket.com and Rightmove. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.