Zero. That's the grand total of growth stocks in my portfolio that I've sold as the stock market has declined in recent months. Sure, quite a few of the growth stocks that I own have plunged a lot more than the overall market has. But my underlying premise for buying the stocks hasn't changed, so I've stayed the course.
However, there definitely are some stocks whose prospects I like better than others. Here are my three highest-conviction growth stocks right now.
Image source: Getty Images.
1. Alphabet
There's a lot of talk about Alphabet's (GOOG -2.19%) (GOOGL -2.08%) 20-for-1 stock split. I fully expect that the move could serve as a catalyst for the shares. But the split isn't even a blip on the radar screen of why I have a super-high conviction level about Alphabet.
My primary reason to be confident about Alphabet is the company's strong moat. Rivals have tried to dethrone Google Search. They've all failed. Sure, TikTok has made some inroads into YouTube's territory. But 2 billion people still visit YouTube every month -- roughly twice as many who use TikTok. YouTube Shorts (short videos of no more than 60 seconds) and streaming TV present significant growth opportunities for the app.
Speaking of growth, Alphabet has plenty of growth drivers in addition to its core advertising business. Google Cloud continues to gain momentum. When (not if, in my opinion) the unit becomes profitable, Alphabet's earnings will kick into a higher gear. I think that several of the company's "other bets," especially its self-driving-car business Waymo and drone delivery service Wings, have huge potential.
And don't get me started on Alphabet's valuation. The stock is trading at only 19.2 times expected earnings. Its trailing-12-month price-to-earnings multiple of 19.7 is in the same ballpark as it was during the market meltdown of 2008-2009. Shares are actually even cheaper than they look at first glance thanks to the company's cash stockpile of nearly $134 billion.
2. Brookfield Renewable
Ben Franklin wrote that the only two things certain in life are death and taxes. I think old Ben would be tempted to include a shift to renewable energy if he were alive today. This trend is why I'm supremely confident in the long-term prospects of Brookfield Renewable (BEP -0.14%) (BEPC 0.13%).
Some might see this stock (actually, there are two stocks for the same underlying business -- one is a limited partnership and the other a corporation) as more of an income play. It's true that Brookfield Renewable offers an attractive dividend. As much as I like the dividend, though, I'm even more excited about Brookfield Renewable's growth potential.
The company's development-pipeline capacity of 62 gigawatts is almost three times larger than its current capacity of 21 gigawatts. Around 70% of that pipeline focuses on solar and wind energy, sources that are already more cost-effective than coal and gas.
Countries and major corporations around the world are scrambling to reduce carbon emissions over the coming decades. Their goals won't be met without a significant increase in the use of renewable energy. My view is that Brookfield Renewable is about as close to a slam-dunk growth stock as you're going to find.
3. Vertex Pharmaceuticals
Many investors associate biotech stocks with high risk. While that's often true, I think that Vertex Pharmaceuticals (VRTX -0.21%) is an exception. The company sells the only approved drugs that treat the underlying cause of cystic fibrosis (CF).
Vertex has a relatively easy path to growth in the CF market. It has an opportunity to boost the number of patients who use its therapies by more than 50% by securing additional reimbursement deals and winning regulatory approvals for younger age groups.
The company also should have tremendous growth potential beyond CF. Vertex's pipeline features three programs either currently in or soon to be in late-stage testing with blockbuster sales potential. CEO Reshma Kewalramani correctly stated in the biotech's first-quarter conference call, "Our clinical-stage pipeline has never been broader in terms of the number of disease areas, more diverse in terms of modalities or more advanced."
You might think that Vertex would be expensive with all of these opportunities. However, its shares trade below 18 times expected earnings. Vertex's price/earnings-to-growth (PEG) ratio is a super-low 0.38. I think this biotech stock is poised to be a huge winner over the next several years.
