How I’d find top growth shares to buy at cheap prices in December 2020

Investing money in top growth shares at today’s cheap prices could lead to impressive returns over the long run, in my opinion.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Taking the time to find top growth shares to buy at cheap prices could be a worthwhile move in the long run. It may allow an investor to take part in improving company performances, while benefiting from a potential increase in valuation over the coming years.

Through focusing on solid businesses operating in sectors with strong growth outlooks, but that face challenging near-term prospects, it may be possible to capitalise on the stock market’s future growth potential.

Identifying top growth shares in attractive sectors

Top growth shares are likely to deliver improving profitability in the coming years. That is because of the attractive prospects for the industries in which they operate. If they have weak operating conditions in the years ahead, they are more likely to record disappointing sales and profit growth.

As such, identifying industries with attractive growth prospects could be a sound move. This process may understandably be more difficult at the present time due to the rapid changes that are taking place across the global economy in response to the pandemic. However, some sectors appear to have sound long-term growth prospects that could be conducive to rising profitability for their incumbents.

For example, sectors such as healthcare and technology may provide long-term opportunities for top growth shares. Think of trends such as an ageing world population and changing consumer tastes that rely to a greater extent on new technology. They may mean that opportunities to expand sales and profitability are extensive within those sectors.

Focusing on strong companies facing uncertain operating conditions

Finding top growth shares at cheap prices may mean focusing on strong companies that face challenging near-term prospects. Strong companies may be those that have solid financial positions that can be used to buy up rivals or to develop new goods and services. They may also have wide economic moats that could enable them to deliver superior financial performances to their peers over the long run.

However, they may be facing difficult operating conditions in the short run caused by the pandemic. This may provide an investor with the opportunity to buy them while they trade at cheap prices. Other investors may be more concerned with their near-term outlooks, rather than their long-term growth potential. Through having a patient approach, it may be possible for an investor to capitalise on long-term growth opportunities at low prices.

Managing risks

Clearly, the prospects for top growth shares can change rapidly. Their current outlooks may improve or worsen over the coming months and years. Therefore, it is crucial to manage risk, in terms of diversifying across a range of sectors and geographies. This may not only mean lower losses, but could also create a less volatile portfolio. And that could provide a more effective means of achieving an investor’s financial goals in the coming years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »