2021 is going to be a great year for growth stocks, in my opinion. History shows that stock markets tend to recover after a crisis. Investing in the 2008/09 global financial crisis would have proved lucrative for long-term investors in growth stocks.
With a vaccine programme now under way in the UK, the pandemic could be under control or even over by the second half of 2021. As stock markets tend to look forward six to nine months, I think now is the time to consider growth stocks that could do well in an economic recovery.
Large growth stocks
At the top of my list is the FTSE 100’s mining giant Rio Tinto. Mining predominantly iron ore, it has already benefited from a 60% rise in the price of the industrial metal this year. But I also think a combination of rising global demand and constricted supply could cause commodity prices to rise further. In addition, continued central bank stimulus and a weaker dollar should support prices.
As a complete contrast, there’s online sports betting and gaming, which is a global and growing business area. When the pandemic shut down physical casinos and betting shops in 2020, the shift to online gaming accelerated. So, online gaming companies including Flutter Entertainment benefited. I consider it as my top pick among several growth stocks in this sector as I like that it includes several popular brands, including Paddy Power and Betfair. In addition, it also owns FanDuel, PokerStars and FOX Bet in the US. That’s important because I’d say the greatest growth area is in the US as several states move towards legalising online sports gambling. I’d consider Flutter to be well-positioned to capitalise on this huge growth opportunity.
Avon Rubber is the third-greatest performer in the FTSE 350 over the past 10 years, with a whopping 1,700% return and is one of my chosen growth stocks. It’s a UK-based world leader in respiratory protection equipment and as a shareholder, I was pleased to see strong revenue growth throughout its financial year. I think its strategy of expanding its product portfolio is working well, which could lead to a bigger and broader business, providing further growth over the coming years.
Games Workshop continues to be a high-quality growth stock that I would continue buying. It’s now the best-performing stock in the FTSE 350 of the past 10 years, up over 2,200%. Even with this share price growth, I think there’s much more to come. This UK-based, global business operates a high-margin, high-return-on-capital business in a niche market. Revenues, profits, and cash flow are all growing well. So I’m confident it can continue to reward investors over the coming years.
Finally, I would describe B&M European Value Retail as a low-volatility growth stock. This leading variety goods value retailer made a strong start to its second half. During the first UK lockdown, it was classed as an essential retailer and was permitted to stay open. It reported that trading was strong and it even gained new customers. B&M operates in a growing sector and has plenty of room for expansion, in my opinion. And I like that it’s founder-led, cash-generative, and has scope for growth both in the UK and France.
Harshil Patel owns shares of Games Workshop and Avon Rubber. The Motley Fool UK owns shares of Flutter Entertainment. The Motley Fool UK has recommended Avon Rubber and B&M European Value. 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.