The Motley Fool

Best stocks to buy now: here’s why I’d go for growth over value

Image source: Getty Images

Different investors have different strategies for selecting the best stocks to buy now. There are too many for me to discuss in one go, but one of the most common strategies is to focus on buying either growth stocks or value stocks. These are two separate camps, but at the moment I’m in the growth stock side. Here’s why.

Growth versus value

Growth stocks are shares in a company that typically has strong momentum behind it. The pace of growth, be it in revenue, employees, or products, is higher than average. This usually pulls the share price higher as well, making it attractive for investors looking for a high return. 

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...

Fast growing companies in the right industries can perform very well. This ticks a large box when trying to find the best stocks to buy now. However, to be compensated for this return, growth stocks usually have high volatility. It can also be difficult to know what the fair price of the stock is, as the value might be placed on potential future earnings many years down the line.

On the other hand, value stocks are ones that are typically undervalued and out of favour in the short run. Usually the metric of looking at the share price relative to earnings (P/E) is used to classify what is a value stock.

Value stocks can be attractive to an investor like myself as over time, the share price should return to a fairer (higher) value. This should represent a profit to me versus my purchase price. However, value stocks can stay undervalued for a long period, and so patience is needed.

Finding the best stocks to buy now

In terms of looking for the best stocks to buy now, I think the time is right for growth stocks. I feel the UK economy is starting to really turn on the engines. The Bank of England expect GDP growth of 5.5% during Q2! In this stage of an economic cycle, growth stocks should outperform.

If I wanted to get even more specific, I’d want to target the growth stocks within the areas that are leading the way. I expect areas such as banks, healthcare, and some travel/tourism to be at the front of the pack. So I’d be filtering for companies here that are already starting to put out strong Q1 trading updates, and identify these as the best stocks to buy now.

Another reason why I prefer growth over value right now is due to the difficulty with identifying true value. The pandemic has hit many stocks hard, and so earnings for 2020 are negatively impacted.

It’s hard for me to say right now which of these companies is undervalued. This is because some of them might simply never return to pre-pandemic levels. If the business model has fundamentally shifted over the past year, the share price is unlikely to recover. Due to this risk, I’d prefer to stay away from trying to pick value stocks right now.

So to find the best stocks to buy now, I’m looking for growth stocks in popular sectors to invest my money.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

jonathansmith1 has no position in any share mentioned. The Motley Fool UK has no position in any share mentioned. 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

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.