As a long-term investor, the current year might be among the best times to buy growth stocks. Sentiment has been pessimistic considering macro-economic and geo-political factors. As a result, some high-quality growth stocks have fallen into a deep correction.
A simple investing rule is to buy when fear is the dominant sentiment. Of course, I would go slow and hold a balance of growth and large-cap stocks in the portfolio. However, there is no reason to press the panic button.
Even if there is a sharp slowdown or recession, policymakers will step in with renewed expansionary policies. Growth can therefore be supported.
A slowdown can also be a blessing in disguise as commodity and energy-driven inflationary pressure can potentially ease.
In this column, my focus is on growth stocks from industries that have multi-year tailwinds. They look attractively valued for exposure at current levels. I would not be surprised if these growth stocks deliver multi-fold returns to boost the portfolio health.
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Policymakers in China are considering an extension of EV subsidies. Further, a tax cut on low-emission vehicles has also been announced. Favorable policy coupled with innovation will drive long-term growth for XPeng.
For Q1 2022, the company reported 159% growth in vehicle deliveries to 34,561. In the next few years, deliveries growth will continue for two reasons.
First, XPeng has an attractive pipeline of new models. P5 was launched in October 2021 and G9 is scheduled for launch in the last quarter of 2022. New products will boost growth. Further, XPeng is targeting aggressive expansion in Europe. This is another catalyst for sustained growth in deliveries.
Talking about innovation, HT Aero, an affiliate of XPeng, plans to launch flying cars in 2024. Considering these factors, I would not be surprised if XPEV stock trades in triple digits by 2025.
Rada Electronic (RADA)
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With a rise in geo-political tensions, defense stocks are likely to remain in the limelight. Rada Electronic (NASDAQ:RADA) is an emerging name from the defense sector that’s positioned for multi-fold returns.
As an overview, Rada is primarily in the business of tactical radars. The company believes that it has a total addressable market of $6 billion. This leaves ample scope for growth in the next few years.
From a growth perspective, Rada reported revenue of $76 million for 2020. For the current year, the company has guided for revenue of $140 million. Top-line growth has therefore been robust. Furthermore, Rada targets to achieve revenue of $250 million (organic) in the next three to four years.
Clearly, RADA stock looks attractive at a forward price-to-earnings-ratio of 26.1. As defense spending increases globally, the company’s order backlog is likely to swell. For Q1 2022, the company reported an order intake of $29 million, which was higher by 22% on a year-on-year basis.
Overall, Rada is positioned for sustained top-line growth and EBITDA margin expansion. RADA stock can easily do a 2x or 3x in in the next few years.
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Deep correction in growth stocks presents a good opportunity to accumulate quality names for the long term. Pinterest (NYSE:PINS) has declined by almost 50% in the last six months. At a forward P/E of 21.8, the stock is worth considering.
I believe that there are two major reasons to be bullish on PINS stock.
First, Pinterest reported average revenue per user of $4.98 in the United States in Q1 2022. The ARPU for Europe was 72 cents. However, the ARPU for the rest of the world was just eight cents. Even if the ARPU for rest of the world is around European levels, there is ample scope for revenue and cash flow upside. The encouraging data is that rest of the world’s ARPU increased by 164% on a year-on-year basis for Q1 2022.
Further, the entire focus is on making Pinterest a proxy shopping platform. I would look at the company as a quality e-commerce bet with global presence. As active users swell, it’s likely that advertising revenue will also increase.
PINS stock has declined from 52-week highs of $82 to current levels of around $17. I would not be surprised if the stock is back to these highs by 2025.
Riot Blockchain (RIOT)
Riot Blockchain (NASDAQ:RIOT) is a high-risk bet that I would include in my portfolio of growth stocks. If Bitcoin (BTC-USD) surges higher again, RIOT stock would see multi-fold returns in the blink of an eye.
It’s worth noting that Bitcoin has witnessed correction of more than 50% in several instances in the past. While contractionary monetary policies have impacted the cryptocurrency, the king of cryptos could very well earn it all back when conditions improve.
Specific to Riot, the company continues to pursue its ambitious growth plans. As of May 2022, the company reported hashing capacity of 4.7EH/s. By January 2023, Riot expects to boost hashing capacity to 12.8EH/s. This would also imply multi-fold growth in Bitcoin production and revenue.
Riot is also well positioned from a financial perspective. As of March 31, the company reported net cash of $113.6 million. The company also has 6,320 Bitcoin held in the balance sheet. Once sentiments reverse for cryptocurrencies, there will be no stopping RIOT stock.
Lithium Americas (LAC)
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The electric vehicle industry might be facing temporary headwinds. However, the long-term outlook remains robust with global EV adoption still at an early stage.
With quality lithium assets, Lithium Americas (NYSE:LAC) is a good way to benefit from the EV boom. LAC stock has corrected from 52-week highs of $41.56 to current levels of $20.98. This presents a good accumulation opportunity.
The company has 100% ownership in the Thacker Pass project in the U.S. At full production capacity, the project is expected to deliver an average annual EBITDA of $520 million. Further, Lithium Americas also has 44.8% stake in the Chauchari-Olaroz project in Argentina. The project is estimated to deliver an average annual EBITDA of $308 million.
Once these projects are operational, Lithium Americas is positioned for healthy cash flow upside. Lithium currently $500 million in cash and a strong balance sheet. The project development towards production phase is likely to be steady.
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Even with fears of slowdown or recession, Brent oil is trading near $120 levels. The geo-political risk premium in oil prices is likely to ensure that there is no big correction in black gold. Oil and gas exploration stocks have surged in the last few quarters.
However, I still see value in onshore and offshore rig companies. Transocean (NYSE:RIG) is my top pick from the offshore rig sector. Transocean seems positioned for strong growth in the next few years driven by two factors.
First, with higher oil price, day-rates are likely to increase. This will translate into higher revenue and cash flows. Further, Transocean still has 12 cold-stacked rigs. As the market gains traction, new order inflow will ensure that rig utilization improves.
It’s worth noting that Transocean has an order backlog of $6.5 billion. This provides clear revenue and cash flow visibility. Further, the company has a strong liquidity position of $2.7 billion. With a target to deleverage over the next few years, the outlook seems positive.
Overall, I would not be surprised if RIG stock sees 4x or 5x gains in the next few years. With a modern rig, the company is best positioned to benefit from the tailwinds.
Palantir Technologies (PLTR)
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Palantir (NYSE:PLTR) stock has plunged by 58% for year to date. After a deep correction, the stock looks attractive. I believe that Palantir is misunderstood and with innovation in the forefront, the company will create value in the next few years.
It’s worth noting that Palantir reported healthy top-line growth of 31% for Q1 2022. The company also reported positive adjusted free cash flow of $30 million for the quarter.
Importantly, Palantir has guided for government revenue growth of 30% or higher through 2025. With healthy growth in commercial revenue and customer count, the target seems achievable.
For the last quarter, Palantir reported an increase in customer count by 40. A net dollar retention ratio of 124% in Q1 2022 also looks attractive.
Last month, PLTR stock touched lows of $6.44. The stock is already higher by 19% from its lows. In all probability, the stock has bottomed out and it’s a good time to accumulate.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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