For better or worse, growth stocks are notoriously volatile. But for astute investors who can manage to recognize timely buying opportunities, they can be a fantastic way to generate outsized gains over the long term.
So we asked three top Motley Fool investors to each discuss a growth stock that they think investors should consider buying now. Read on to learn why they like following stocks.
Top 10 Tech Stocks To Invest In Right Now: Twitter, Inc.(TWTR)
Twitter (NYSE:TWTR) added to its 47% spike in 2017 to gain over 80% so far this year. The micro-blogging platform isn’t logging anything near the user growth or the profit boosts that peer Facebook has managed. However, Twitter did post a 21% sales improvement in the most recent quarter as growth accelerated sharply from the prior quarter’s 2% uptick. Looking ahead, shareholders are hoping that CEO Jack Dorsey and his team can significantly boost the user base from its current level of 336 million. As its content trends toward high-margin video, meanwhile, advertising income should help Twitter log another year of earnings improvements as it works toward achieving annual profitability.
Top 10 Tech Stocks To Invest In Right Now: Hess Corporation(HES)
While red-hot oil prices helped fuel Hess’ gains this year, it was far from the only catalyst. Hess and its partner ExxonMobil announced three more offshore discoveries near Guyana, bringing the total to eight. The partners now plan to develop three phases of that field, which could produce more than 500,000 barrels of oil per day by late 2023. In addition to that, Hess continued cleaning up its portfolio and balance sheet by selling its joint venture in the Utica Shale and paying off more debt. Meanwhile, the company has used the excess cash generated by higher oil prices to buy back stock, authorizing a $1.5 billion repurchase program, enough to retire nearly 10% of its outstanding shares. The company could expand that program even further later this year given the uptick in crude prices.
Top 10 Tech Stocks To Invest In Right Now: Red Hat, Inc.(RHT)
This is a rare opportunity to pick up shares in a red-hot growth stock at a serious discount.
The Linux and open-source software veteran had seen its share prices double in 52 weeks, heading into June’s first-quarter report. In that report, Red Hat exceeded its own guidance targets across the board and also stomped Wall Street’s expectations. Yet, the stock took a 12% nosedive the next day and has stayed down ever since. Today, Red Hat shares are trading 23% below those pre-earnings highs.
Analysts took one look at Red Hat’s modest second-quarter guidance, ignoring optimistic full-year targets, and punished the stock with a slew of downgrades and target-price cuts.
It’s true that Red Hat shares were trading a little high before this correction, as the market cap amounted to 112 times trailing earnings and 36 times free cash flows. But Red Hat has earned its druthers by posting a long string of fantastic high-growth results. In the first quarter, earnings rose 24% year over year on 20% higher sales.
The growth story hasn’t changed — analysts simply overreacted to a strong seasonal swing. Right now, Red Hat’s stock trades at 27 times free cash flows — quite comparable to larger and slower-growing enterprise software rivals SAP (NYSE: SAP) at 33 times FCF and Microsoft’s (NASDAQ: MSFT) price-to-FCF ratio of 23.
This sale won’t last. Grab Red Hat’s stock while the discount is hot.
Top 10 Tech Stocks To Invest In Right Now: Apple Inc.(AAPL)
Successful investors know the value of a company that generates cash and has a durable competitive advantage over the competition. If you combine those with growth you get a stock with home run potential. That’s why after all these years of the stock going up, Apple is still a great buy today.
The chart below shows that Apple is still a growth company, increasing revenue by 45% over the last five years and generated over $53 billion of net income in the past year.
AAPL REVENUE (TTM) DATA BY YCHARTS.
What Apple has going for it is an engrained ecosystem in smartphones that will be nearly impossible for competitors to penetrate. The iPhone may only have 15.6% of the global smartphone market, according to IDC, but it’s the premium portion of the market and generates far more value than competitors. iPhone is also the center of the ecosystem, which expands to Macs, Apple TVs, AirPods, and other products that work seamlessly with Apples apps and services.
For investors, the earnings you see above are returned in the form of a dividend, currently yielding 1.6%, and share buybacks using the $145.4 billion of net cash on the balance sheet. With a new plan to be "cash neutral," that could mean hundreds of billions in share buybacks over the next decade, $100 billion of which is already authorized by the board of directors. Whether you’re looking at earnings, cash on the balance sheet, or a company with a wide competitive moat, Apple fits the bill.