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Forget Tesla shares. I’d buy these US and UK growth stocks

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Tesla shares are popular with UK investors at the moment. Last week, Tesla was the most bought stock on Hargreaves Lansdown.

Personally, I see it as quite a risky stock to buy. For a start, the stock is up almost 800% over the last year, which means there’s the risk of a decent correction. Secondly, at its current market cap of $390bn, the company is priced as if it’s going to completely dominate the automotive industry going forward. I’m not convinced it will.

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If you’re looking for growth stocks, I think there are better, less-risky opportunities than Tesla shares right now. With that in mind, here are three growth stocks I’d buy over TSLA.

Mastercard

One growth stock I like right now is Mastercard (NYSE:MA). It’s a key player in the payments industry.

There are many reasons I like Mastercard. Firstly, its growth potential is enormous. Believe it or not, around 80% of the world’s transactions are still cash-based. This means that Mastercard has a huge growth runway ahead of it. According to McKinsey, credit cards businesses will add an additional $160bn of revenue over the next five years as the world transitions away from cash.

Secondly, Mastercard is very profitable. Over the last three years, return on capital employed has averaged 43%. This means it can reinvest a substantial amount of money back into the business (and become much larger). 

Third, Warren Buffett holds the stock. That’s always a good sign.

The shares are not cheap. Currently, the forward-looking P/E ratio using next year’s earnings forecast is 40. That valuation adds some risk. However, overall, I see the risk/reward proposition as attractive, especially compared to Tesla shares.

Alphabet

Another stock I’d buy before Tesla is Alphabet (NASDAQ: GOOG). It’s one of the largest technology companies in the world and owns Google and YouTube.

There are a few reasons I see investment appeal here. Firstly, both Google and YouTube have dominant market positions. Google is the heart of the internet. Meanwhile, YouTube has become a mainstream form of entertainment.

Secondly, Alphabet is a key player in the cloud computing industry. Cloud technology underpins nearly all of the great technologies we use today. Last quarter, its cloud revenues grew 43% to $3bn.

Additionally, Alphabet has around $120bn cash on its books. This means it has the potential to make exciting acquisitions in the future.

Alphabet shares currently trade on a forward-looking P/E of 26 using next year’s earnings forecast. I think that’s good value.

dotDigital

Finally, turning to the UK market, I also like the look of dotDigital (LSE: DOTD). It’s an under-the-radar technology company that provides Software-as-a-Service (SaaS) marketing solutions.

You won’t hear about this company in the same way you hear about tech giants such as Tesla. It’s a much smaller company. However, I wouldn’t let that put you off. dotDigital shares have delivered excellent returns for investors in recent years (1-year return: 58%, 5-year return: approx 275%). I think there’s plenty more growth ahead.

A recent trading update from DOTD was certainly encouraging. Organic revenue for the year was up 12%. Meanwhile, revenues in Asia grew 37%. The company said that the pandemic had “minimal impact” in Q4.

Overall, I’m excited by the potential here. The stock is not cheap – the forward-looking P/E ratio is 35. However, I see it as a safer bet than Tesla shares.

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Edward Sheldon owns shares in Hargreaves Lansdown, Mastercard, Alphabet, and dotDigital. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Mastercard, and Tesla. The Motley Fool UK has recommended dotDigital Group and Hargreaves Lansdown. 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.

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