We often hear the same recommendation from market “experts” each time the stock market crashes.
It is time to “switch from growth to value” as “growth stocks were poised for a fall”.
It could be some other variation of the above, but you get the point.
What these pundits are trying to prove is that “growth is dead”, and you’d be better off trawling through the bargain bin for cheap stocks.
To say this is a flagrant exaggeration is an understatement.
Growth stocks have always been around and will continue to be the key focus for investors.
Remember that the main reason companies list their shares on a stock exchange is to raise money to fund growth initiatives.
To boldly claim that growth is not fashionable anymore completely misses the point that many businesses continue to churn out steady, consistent growth even through tough times.
I argue that you just need to know where to look.
In the current market, there are still many pockets of growth to be found. Let’s explore a few of these areas.
Consumer-driven growth amid a recovery
Consumers are itching to spend more after being cooped up by restrictions for the last three years.
Call it revenge spending if you will, but the propensity to spend has always been there.
It’s just been repressed and is now looking for a suitable outlet.
Both payment providers Visa (NYSE: V) and Mastercard (NYSE: MA) have reported numbers that demonstrate this trend.
For the quarter that ended 31 March 2023 (1Q 2023), Visa saw its revenue rise 11% year on year while net income jumped 17% year on year to US$4.3 billion.
In the same quarter, Mastercard also saw its revenue rise 11% year on year.
Where is all this spending going, you may ask?
Into companies such as Nike (NYSE: NKE) and Starbucks (NASDAQ: SBUX).
The sporting giant reported a 14% year on year increase in revenue for the quarter that ended 28 February 2023 while the coffee chain saw its revenue jump 14.2% year on year to US$8.7 billion for the quarter that ended 2 April 2023.
Some of that spending is also benefitting brick-and-mortar stores such as Tractor Supply Company (NASDAQ: TSCO).
The largest rural lifestyle retailer in the US saw its revenue for the first quarter of this year rise by 9.1% year on year to US$3.3 billion.
The cloud continues to power many businesses
In case everyone’s forgotten, there is also a crop of software-as-a-service (SaaS) businesses that continues to power on despite the shift away from growth.
These companies continue to ply their trade, strengthen their franchise and increase their recurring revenue streams.
Just look at digital signature specialist DocuSign (NASDAQ: DOCU) and customer relationship management software provider Salesforce.com (NYSE: CRM).
The former reported a 19% year on year jump in revenue for its fiscal year 2023 (FY2023) ending 31 January 2023 while the latter saw revenue rise 18% year on year over the same period.
Similarly, identity management specialist Okta (NASDAQ: OKTA) saw revenue for FY2023 climb 43% year on year to US$1.86 billion while cybersecurity expert Crowdstrike (NASDAQ: CRWD) reported a year-on-year revenue surge of 54%.
These are just some examples of SaaS companies that are still chugging along fine and growing their businesses steadily.
Technology giants with strong moats
The technology giants may be massive, but they continue to boast sturdy competitive moats that allow them to carry on growing, albeit at lower rates than during the pandemic.
Google’s owner, Alphabet (NASDAQ: GOOGL), reported a small 3% year on year rise in revenue for 1Q 2023 and its cloud service turned in an operating profit for the quarter.
Meta Platforms (NASDAQ: META), the owner of the social media site Facebook and photo and video-sharing site Instagram, saw revenue inch up by the same quantum of 3% year on year.
E-commerce behemoth Amazon (NASDAQ: AMZN) managed to post a 9% year on year increase in sales to US$127.4 billion for 1Q 2023.
Get Smart: Select quality businesses and stay patient
The evidence is clear.
There is a plethora of growth stocks out there exhibiting consistent, steady growth.
Growth is far from being dead.
If you peer beneath the lid of numerous well-known companies, you will see that there is still a wealth of opportunities out there to own strong growth stocks.
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Disclosure: Royston Yang owns shares of Alphabet, Meta Platforms, Nike, Tractor Supply Company, Visa, Mastercard and Starbucks.
