I don’t regularly invest in growth stocks, instead I prefer dividend stocks that provide me with a regular source of income. After all, its worth remembering that many growth stocks fail, so it’s not always worth taking that risk.
Instead, I carefully pick my top growth stocks, looking at their performance, valuation, and the trends on which their growth is dependent.
Why now?
Growth stocks tanked at the end of 2021 and into 2022. January’s growth/tech sell-off came on the back of a surge in US Treasury yields. This hurt more expensive growth stocks that are valued on expectations for future earnings. Growth stocks often trade with very high price-to-earnings (P/E) multiples, or if they’re not profit-making, high price-to-sales (P/S) ratios.
Despite a few small surges, growth stocks are yet to properly recover. One reason is that interest rates have been rising and this increases the cost of growth. So, right now, it can be wise to look at growth stocks with few debt obligations and plenty of cash.
Pick no. 1
Li Auto (NASDAQ:LI) shares jumped last week on hopes the Chinese government would consider relaxing Covid-19 restrictions. But as those hopes died this week, the share price slumped again.
The Chinese electric vehicle (EV) manufacturer is among three highly promising outfits, but Li could be the first to turn a profit despite facing challenges this year. Li Auto’s delivery growth tanked in 2022, delivering just 4,571 EVs in August.
The 56% month-on-month drop-off in deliveries was put down to Covid-19 and supply chain restraints. The government’s zero-tolerance approach really has slowed down the industry’s growth this year.
However, more positively, Li’s L9 model — which was long awaited — looks set to disrupt the EV market. The $70,000 SUV comes with two electric engines and one petrol, providing a 1,100km driving range. Containing a wealth of tech, including sizeable infotainment displays controlled by 3DToF hand/finger tracking cameras, the car is being promoted as the best SUV anywhere on the market.
The firm is currently trading with a P/S ratio of just three — Tesla‘s P/S ratio is 10 — and looks cheap compared to other US peers.
For me, the main factor holding Li back right now is Chinese lockdowns, and I just can’t see that lasting forever. As such, I’m buying Li Auto shares ahead of its growth into the global car market.
Pick no. 2
Somero Enterprises (LSE:SOM) manufactures laser-guided and technologically innovative machinery used in horizontal concrete placement. It might not sound phenomenally interesting, but it doesn’t need to be.
Such equipment plays an integral role in the construction industry, advancing productivity, concrete flatness and site efficiency. Moreover, despite being down 25% over the year, the US Congress recently passed the $1trn infrastructure investment bill. As such, the firm should have little trouble finding demand for its products.
Supply disruptions have been impacting non-US operations and, thus, the share price. But I don’t see this being a long-term feature. I’m buying Somero shares as I see the company playing an increasingly important role in the construction industry in the years to come.
The post I’d buy cheap growth stocks this autumn to try and get rich! appeared first on The Motley Fool UK.
6 shares that we think could be the biggest winners of the stock market crash
The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now.
And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate!
What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.
Learn more
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
2 dividend stocks that are dirt cheap right now
2 high-potential stocks to buy for the electric car revolution!
Best British growth stocks to buy for November
James Fox has no position in any of the shares mentioned. The Motley Fool UK has recommended Somero Enterprises, Inc. 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.