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Got $5,000? These Are 2 of the Best Growth Stocks to Buy Right Now

By David Jagielski – Jun 15, 2021 at 6:15AM

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Their exciting sales numbers should only improve as the year goes on.

Are you ready to invest available cash, and on the hunt for some great deals? The bullish hits that growth stocks have taken over the past few months have rattled some investors. But that doesn't mean there aren't any attractive growth picks out there that can make solid additions to your portfolio.

Two stocks that you'll want to consider are Scotts Miracle-Gro (SMG -1.25%) and Alibaba (BABA -1.85%). They operate in vastly different industries and parts of the world. But together, they offer excellent growth prospects and can add some great diversification to your portfolio. 

Business person giving a thumbs up.

Image source: Getty Images.

1. Scotts Miracle-Gro

Investing in the cannabis industry can be a risky proposition: Many companies aren't profitable, the industry isn't federally legal in the U.S., and many investors have lost lots of money on some bad pot stocks. But Scotts Miracle-Gro is different. While it will benefit from the cannabis industry's growth, it doesn't directly deal with the plant, which means it avoids the legal headaches of where it can and can't do business. It's a pick-and-shovel investment that helps individuals and companies grow cannabis (and other crops).

Its main business is technically lawn and garden, which makes up the bulk of its sales and falls under its U.S. consumer segment. That business generated $1.4 billion in revenue for the period ending April 3 and grew at a rate of 23% year over year.

The Hawthorne Gardening Company, Scotts' hydroponics segment, gets a boost from cannabis-related operations. Hydroponics is a way to grow crops more efficiently utilizing pipes and pumps. It takes up less space than a regular gardening operation, and it doesn't require soil. Although that area of Scotts' business is smaller with just $364 million in sales last quarter, it's much faster growing -- up 66% from the prior-year period.

The fact that Scotts' stock is down to levels not seen since December 2020 is mind-boggling when you consider that the company raised its guidance this month. It expects to grow its sales by up to 19% this year, and Hawthorne's revenue could rise between 40% and 45% -- up from the previous forecast that called for growth of no more than 40%. I think this one is a top growth stock to own, especially as the cannabis industry gets bigger and more state markets legalize marijuana use.

2. Alibaba

Alibaba is one of the cheaper tech stocks you'll find on the markets today. Trading at a forward price-to-earnings multiple of just 26, it's well below the premiums investors are paying North American-based tech companies -- Alphabet and Amazon trade at 33 and 64 times their profits, respectively. Admittedly, there is some added risk with Alibaba given that it operates in China and government rules make its business a bit riskier and its future more uncertain.

The Chinese government leveled Alibaba with a $2.8 billion fine earlier this year for trying to prevent merchants from using other e-commerce platforms. Alibaba has also been negatively impacted by the government thwarting Ant Group's IPO -- the company owns one-third of the fintech business. Despite these risks and more potential restrictions as China looks to limit the power of tech giants like Alibaba, I still think the stock may be worth buying; the country isn't likely going to torpedo one of its most popular and successful entities on the world stage.

In the first three months of 2021, Alibaba's sales grew by 64% to $28.6 billion. Although that included a boost from taking a controlling stake of supermarket business Sun Art last year, even excluding those numbers its sales were still up by 40%. All of its major segments were up by at least 12% in its most recent quarterly results. And that's in line with how its businesses performed in all of 2020 when Alibaba's sales of $72 billion rose by 35%.

Another reason to be bullish on Alibaba's future: The Chinese economy has been on fire this year, reporting a record growth rate of 18.3% in GDP for the first quarter of 2021 (the U.S. grew by 6.4%). Although that rate isn't sustainable, analysts project that for the full year, the economy could still expand by 8.3% thanks to pent-up demand and a recovery in global demand.

With plenty of opportunity on the horizon and Alibaba trading at a reduced price, the stock could generate great returns if you're willing to take on some risk.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. David Jagielski owns shares of Scotts Miracle-Gro. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, and Scotts Miracle-Gro. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned

Scotts Miracle-Gro Stock Quote
Scotts Miracle-Gro
$55.23 (-1.25%) $0.70
Alibaba Group Stock Quote
Alibaba Group
$85.94 (-1.85%) $-1.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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