For a company to be considered a "growth stock," the only real criteria is that you are buying it because you believe in the unbridled potential for the stock’s price to go up over time.
That being said, I personally believe adding some specific criteria can help to increase the probability of finding a stock with Amazon-esque return potential. By buying companies with market capitalizations under $20 billion, there’s more room for the stocks to grow over time. And by buying companies that have shown strong revenue growth — an average of over 20% over the past three years — that makes it likely these companies are offering what consumers want more and more of.
Hot Medical Stocks To Watch Right Now: Seagate Technology PLC(STX)
Seagate is a global leader in hard drive manufacturing. It offers a range of disk drive products for the enterprise, client computing, and client non-computing market applications. Seagate is currently sporting a Zacks Rank #2 (Buy) and an “A” grade for Value in our Style Scores system. The firm is currently generating a staggering $6.78 in cash per share on the back of 32% cash flow growth. Seagate takes advantage of its strong cash position by offering investors a dividend of 4.2%, making it one of the most attractive income options in the entire technology sector.
Hot Medical Stocks To Watch Right Now: Wal-Mart Stores, Inc.(WMT)
For years, Walmart reigned supreme over the American retail landscape as its superstores blanketed the heartland and its rock-bottom prices drew hordes of shoppers. However, with the rise of e-commerce, Walmart has been forced to adapt. The company has essentially stopped opening new stores, and instead invested in its current store base, raised wages, and improved training for new employees. Walmart has also focused on e-commerce, adding over 1,000 online grocery pickup locations, and acquiring Jet.com for $3.3 billion, along with smaller online native brands.
Those moves have paid off. Walmart has now reported 14 straight quarters of comparable-sales growth, and its two-year comps jumped 4.4% in the fourth quarter, its fastest clip in eight years. U.S. e-commerce sales surged 44% last year, and profits are also expected to return to growth this year as the investments in recent years begin to pay off on the bottom line.
While it sounds like Walmart is firing on all cylinders, investors seem to have a different opinion.The stock is down 22% from its January high, selling off following disappointing e-commerce growth in the company’s fourth-quarter report, and falling again after the market pooh-poohed its $16 billion acquisition of a majority stake in Flipkart, the Indian e-commerce specialist. The investor response to both news items seems misguided. Walmart still expects U.S. e-commerce growth of 40% this year, indicating that the fourth-quarter increase of 23% was probably just a blip. Furthermore, the Flipkart deal should pay off in the long run, as the Indian e-commerce market is expected to explode over time, reaching $200 billion by 2026.
Walmart still has many of the advantages it always had, including economies of scale and stores within 10 miles of 90% of the U.S. population, giving it a boost in e-commerce. As it adapts to the changing retail landscape, the company should remain among the industry’s leaders.
Hot Medical Stocks To Watch Right Now: Alphabet Inc.(GOOGL)
It might seem crazy to predict that shares of a $750 billion company could double from here. But I think Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) has the potential to do exactly that.
As the parent company of Google, Alphabet already boasts seven products that each have at least one billion active users, including Search, YouTube, Gmail, Android, Chrome, Maps, and the Google Play store. But it’s easy to forget that around 4.5 billion people — two-thirds of the world’s population — still don’t have access to the internet. And the network effect surrounding the already enormous scale of Alphabet’s core product portfolio will mean it’s well positioned to benefit when those people come online.
That’s also not to mention Alphabet’s smaller "Other Bets" segment, which is mostly made up of early stage businesses with massive long-term promise. Think Nest connected-home products, Fiber high-speed internet, Verily Life Sciences solutions, and Waymo self-driving vehicles, to name only a few.
Revenue at Other Bets jumped nearly 50% last year to $1.2 billion. But many of its smaller businesses are still in their pre-revenue stages, so the segment incurred a hefty operating loss of $3.4 billion over the same period. But with a growing cash hoard of nearly $103 billion on its balance sheet at the end of last year thanks to its massively profitable Google operations, Alphabet can afford to continue fostering these bets with a long-term mindset. If any one of them truly begins to take off in the coming years, it could stoke Alphabet’s returns that much more.