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These Are Our 3 Favorite Growth Stocks to Buy In January

By Daniel Foelber, Scott Levine, and Lee Samaha – Updated Jan 13, 2022 at 1:30AM

Key Points

  • Lithium Americas is preparing to start operations at one of its two assets in 2022.
  • ChargePoint is on sale and worth the risk.
  • There are three reasons Cognex could surprise to the upside in 2022.

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This basket of industrial, EV, and technology stocks is poised to grow over the long term.

We're only a few weeks into 2022, and it has already felt like months with market volatility causing stocks large and small to seesaw up and down seemingly at a moment's notice.

If you're looking for some worthwhile growth stocks to buy and hold through the storm, you've come to the right place. Lithium Americas (LAC 0.58%), ChargePoint Holdings (CHPT -2.29%), and Cognex Corporation (CGNX -2.42%) are three growth stocks that could be good buys in January.

Piggy bank riding rocket ship along an upward trending red arrow, pointing to checkered black and white flag.

Image source: Getty Images.

Power growth in your portfolio with this EV play

Scott Levine (Lithium Americas): If you're like most growth investors, you've undoubtedly come across plenty of ink spilled about electric vehicles since the market is expected to grow considerably over the next decade. The International Energy Agency estimates that there were 10 million electric vehicles (EVs) on worldwide roads at the end of 2020, and it projects that the global fleet of EVs will rise to between 145 million and 230 million. With growth like this coming down the pike, it's no wonder that investors are charged up about lithium stocks such as Lithium Americas.

The coming year is expected to be an important one for Lithium Americas. While the company has two assets in its portfolio -- one in Argentina and one in Nevada -- neither of the projects has commenced operations yet, but that should change in 2022. Construction is advancing on schedule at Cauchari-Olaroz, and management expects operations to begin in the middle of the year. The first stage of the project is expected to achieve average annual lithium carbonate production of 40,000 metric tons.

Assuming a long-range lithium carbonate price of $12,000 per tonne, management forecasts Cauchari-Olaroz will generate earnings before interest, taxes, depreciation, and amortization (EBITDA) of $308 million annually. Meanwhile, the company also expects to begin construction of Stage Two -- representing annual lithium carbonate production of about 20,000 metric tons -- at Cauchari-Olaroz in 2022, with operations commencing in 2025.

While Lithium Americas is expected to begin operations in Argentina this year, investors will have to wait a little longer for the company's project in Nevada to start up. However, investors can look for the company to make progress at Thacker Pass in 2022. Management expects to begin early construction work in the first half of the year.

For a pre-revenue company like Lithium Americas, there are plenty of risks that surround an investment, but with the company trading about 29% lower than the all-time high of $41.56 that it reached in November, growth investors have the opportunity to pick up shares while they're in the bargain bin.

A high-risk, high-reward EV play worth considering

Daniel Foelber (ChargePoint): Leading EV infrastructure company ChargePoint has had a rough go of it as of late. Share prices of ChargePoint stock are down 62% in the past year as investors question the path to profitability for EV charging. ChargePoint is losing money and doesn't plan to turn a profit for the next few years. However, like Lithium Americas, its growth is finally picking up the pace as interest in EVs rebounds after a COVID-19-induced lull in 2020.

ChargePoint's fiscal year 2022 (FY22) ends Jan. 31, 2022. The company is expected to report those full-year results sometime in early March. Its most recent guidance, issued on Dec. 7, 2021, said the company expects FY22 revenue between $235 million and $240 million. For comparison, it reported just $146.5 million in FY21 revenue and $144.5 million in FY20 revenue.

Not only is ChargePoint's top-line growth improving, but it's also increasing its gross margin, a sign that it's charting a path toward profitability. It's also opening more DC fast-charging ports as opposed to its standard Level 2 ports. DC fast charging is what the Tesla Supercharger network is built upon. Although unnecessary in cases where a car is parked for an extended period of time (think at home in a garage or at work), ChargePoint stands to benefit from increasing its DC port count to appeal to more customers in locations where faster charging is in high demand.

Despite ChargePoint's potential, the company remains a high-risk, high-reward option in the EV space. Even with revenue growing at a breakneck pace, ChargePoint's FY22 revenue guidance would give it a price-to-sales ratio of 22.5 -- which is expensive even for a growth stock.Therefore, ChargePoint could best be paired with other top EV stocks like Lithium Americas to diversify risk and still capture upside.

The machine vision company's long-term growth drivers remain in place

Lee Samaha (Cognex Corporation): Beset with rising raw material and supply chain costs and coming off a year when it disappointed investors, Cognex doesn't appear to be the ideal growth stock candidate. However, do you buy a growth stock when it's firing on all cylinders, and speculative investors are driving its valuation ever higher? Or, do you buy it when it's lost some of its luster yet still has lots of growth potential? If you favor the latter approach, then Cognex could be for you.

The third-quarter earnings report indeed fell short of expectations, and there's no denying that its elevated freight and component costs are likely to persist through the fourth quarter into 2022.

That said, there are three reasons, one from each of its main markets, why I think Cognex could be one of the best industrial stocks in 2022.

First, the company's profit margin took a hit from extra costs incurred in helping a high-profile logistics customer deploy Cognex's solutions. However, Cognex's management believes the customer could place multiple orders in the future, and e-commerce warehouse logistics is a strong growth industry. So don't be surprised if Cognex announces large logistics orders in 2022.

Second, Cognex had a good year in the automotive sector and demonstrated it would benefit from automakers spending on EV production lines. Throw in recovery in global automotive production in 2022, and Cognex is likely to have another good year in the automotive market.

Finally, the company's consumer electronics orders (Apple is its largest customer) disappointed in 2021. Still, with the semiconductor shortage hopefully clearing up through 2022, it's possible customers may elect to ramp capital spending on new projects in time for production in the fourth quarter. As such, Cognex could receive orders in the second and third quarters.

Daniel Foelber has the following options: long February 2022 $185 puts on Apple and short February 2022 $180 puts on Apple. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple and Tesla. The Motley Fool recommends Cognex and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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