For the past 12 years, growth stocks have rightly been the talk of Wall Street. Precipitously declining interest rates and abundant access to cheap capital have allowed fast-paced companies to innovate, hire, and even acquire other businesses. This trend is unlikely to change anytime soon.
Yet even with the stock market regularly ascending to new all-time highs throughout 2021, bargains still exist for investors on the growth stock front. If you're looking for a trio of growth stocks that could fatten your portfolio in September and well beyond, these companies could be your answer.
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Teladoc Health
Easily one of the most exciting growth stocks this month and well beyond is telehealth giant Teladoc Health (TDOC -0.07%).
Some folks are clearly worried that Teladoc simply found itself in the right place at the right time during the coronavirus pandemic, and that growth will slow down considerably in 2021 and the years to come. There is some truth in these concerns. For instance, after virtual visits skyrocketed from 4.1 million in 2019 to 10.6 million in 2020, they'll grow at a more modest pace to between 13.5 million and 14 million visits this year. But this "slowdown," if you want to call it that, doesn't tell the full story.
What Teladoc Health brings to the table is personalized care disruption that isn't going away. Its platform is allowing patients to connect with their doctors and specialists without having to leave their homes. In turn, physicians can more easily keep tabs on patients with chronic illnesses that may require regular observation. The expectation is that the ease of use of telemedicine services will lead to improved patient outcomes and less money out of the pockets of health insurers. In other words, it's a positive up and down the healthcare treatment chain.
Also, don't overlook the mutability of the coronavirus disease 2019 (COVID-19). As new variants of COVID-19 arise, the likelihood of people choosing to avoid medical settings for non-emergencies increases. The point is that virtual visit growth may not drop off as much as skeptics have predicted.
Teladoc further differentiated itself with the fourth-quarter acquisition of leading applied health signals company Livongo Health. Livongo collects copious amounts of information on patients with chronic illnesses and leans on artificial intelligence to send tips to its members to help them lead healthier lives. As of June, Livongo had 715,000 enrolled members, most of whom have diabetes. With Livongo actively expanding its platform to people with hypertension and weight management issues, its pool of potential members encompasses a large percentage of the U.S. adult population.
With Teladoc and Livongo able to use their platforms to cross-sell to new and existing clients, we're likely witnessing the very early innings of a healthcare growth juggernaut.
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Columbia Care
If small-cap growth stocks are more your thing, U.S. marijuana stock Columbia Care (CCHWF 1.12%) is a company to consider investing in right now.
If you're concerned about whether the U.S. federal government will legalize cannabis, don't be. Even though the lack of federal reform has beaten up pot stock valuations since February, state-level legalizations and organic expansion have provided more than enough opportunity for multistate operators (MSOs) like Columbia Care to thrive.
Most MSOs have a unique strategy for expansion. In Columbia Care's case, it's chosen to be an active acquirer to enter new markets and widen its reach within existing markets. For example, the company's $240 million deal to buy Green Leaf that closed in June gives it access to a key operator in the mid-Atlantic region. Just a few weeks later, in early July, it completed its buyout of CannAscend, an operator of four dispensaries in Ohio. Although expansion by acquisition can lead to higher near-term costs, the fruits of Columbia Care's aggressive expansion should begin to pay off in 2022.
Investors will also notice that Columbia Care has a big-time focus on large-dollar markets, like California and Colorado, as well as limited-license markets, such as Ohio, Pennsylvania, and Illinois. Limited-license markets, as their name implies, cap the number of retail, processing, and cultivation licenses issued in aggregate, as well as to a single business. With regulators in these states purposely reining in competition, Columbia Care is being given the opportunity to build up its brands and create a loyal following in potential billion-dollar markets.
In terms of valuation, Columbia Care should turn some heads. It's currently valued at about three times forecasted sales for 2021, with revenue projected to nearly triple, according to Wall Street, by 2024. Despite this sales surge, Wall Street's earnings per share (EPS) forecast for 2024 has Columbia Care at an EPS multiple of just 12.
If you can stomach the short-term volatility that accompanies the marijuana landscape, Columbia Care could be quite the steal.
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Baidu
A third growth stock that can make investors a lot richer in September and (likely) well beyond is China-based internet search giant Baidu (BIDU 0.98%).
For the past six months, Chinese stocks have left a bad taste in investors' mouths. A crackdown by Chinese regulators on the tech sector and various other industries (e.g., for-profit education) has clobbered valuations and left Wall Street wondering which company might be next on their radar. As a reminder, Alibaba was hit with a record $2.8 billion antitrust fine by China in April.
Though there's no question that the politics behind China-based companies can create a high degree of turbulence, there's also nothing to suggest that Baidu is going to be hit with mammoth fines. That would make its recent decline an intriguing buying opportunity.
What makes Baidu so special is the company's utter dominance in internet search. Over the trailing year, Baidu has controlled between 67% and 80% of China's internet search, according to GlobalStats. As long as the Chinese economy continues to grow by leaps and bounds, advertisers have shown they'll pony up big bucks to get their message in front of consumers. Baidu's leading role as China's top search engine appears incredibly safe.
Arguably the more exciting growth aspect for Baidu is the company's investments in artificial intelligence (AI) and cloud services. AI is particularly important given its usage in next-generation electric vehicles. Meanwhile, an increase in data and storage needs has made cloud services a sustainable double-digit growth opportunity. In the June-ended quarter, these ancillary operations grew by 80% for Baidu.
Sporting a double-digit sales growth rate and a forward-year EPS multiple of only 14, Baidu looks like a screaming buy.
