While recent upswings in the markets have shown that the bulls aren't completely absent, there's still plenty of fear simmering under the surface. This has left risk-wary investors scrambling for conservative stocks.
But the market is a diverse place, and others recognize that the current environment is, in fact, an opportune time to pick up growth stocks -- tickers such as Camtek (CAMT 4.18%), MP Materials (MP -0.19%), and Trimble (TRMB 1.59%).
1. Camtek
With a semiconductor shortage continuing to impact a wide swath of industries, interest in semiconductor-oriented companies like Camtek remains high. Unlike companies that manufacture microchips, Camtek specializes in equipment and systems for ensuring that assembled semiconductors perform well metrology (focusing on measurement) and inspection equipment. With semiconductor prices already expected to rise, Camtek provides a critical service that helps manufacturers keep production costs low.
From 5G networks to artificial intelligence to the Internet of Things, technology is becoming increasingly present in our daily lives. All of these -- and plenty more -- applications rely on sophisticated semiconductors, and Camtek has the relevant quality control solutions for all of these applications.
While the company is poised to prosper from growth in the semiconductor industry, investors don't have to wait to see growth in the company's financials. From 2017 to 2021, Camtek's revenue has risen at a compound annual growth rate (CAGR) of 31%, and net income has soared at a 44% CAGR. Strong interest from customers suggests that things won't slow down this year either. Announcing preliminary second-quarter 2022 earnings, Rafi Amit stated, "Our healthy backlog together with a strong flow of orders strengthens our expectations for another record year at Camtek with 2022 year-over-year revenue growth in the mid to high teens."
2. MP Materials
It's no secret that the adoption of electric vehicles (EV) is shifting into high gear these days. But with all this enthusiasm, there are also well-warranted concerns that the production of rare earth metals, also known as rare earth oxides, or REOs, for the industry will be insufficient. Add to this the fact that China is responsible for the majority of REO production, and it's clear that a U.S.-based REO production company like MP Materials would be a compelling consideration for investors.
When digging into potential investments, one of the most alluring things one can find is that a company has a competitive advantage -- something which MP Materials has in spades. True to their name, REOs are rare, and the barrier to entry for prospective mining companies is formidable. MP Materials, however, has an invaluable asset in the Mountain Pass mine, which has helped the company to become the largest REO producer outside of China. Moreover, the company is developing a vertically integrated infrastructure that will result in it mining the metals, producing the concentrate, and developing rare earth magnets -- a critical component in EVs as well as other applications like drones and wind turbines.
MP Revenue (Annual) data by YCharts.
In light of the fact that MP Materials is already generating revenue, earnings, and cash flow, growth investors who are reluctant to take on too much risk should find MP Materials especially interesting.
3. Trimble
Helping companies make better sense of data, Trimble is another name that may make growth investors tremble with excitement. Beginning with dealings in GPS technologies, Trimble has a history that spans more than 40 years. The company may not seem, on its surface, like a growth opportunity, but that'd be a gross misjudgment. Collecting and making sense of data is an increasingly complex and necessary task for companies today -- and increasingly so in the future -- and Trimble, with its over 1,000 patents, helps customers automate and analyze data as well as provide automation and modeling solutions.
The ability to meet -- and profit -- from the evolving data needs of customers is familiar territory for Trimble. From 1999 to 2021, Trimble has grown revenue at an impressive 12.6% CAGR and adjusted earnings before interest, taxes, depreciation, and amortization CAGR of 17%. This, of course, is no guarantee that it will maintain the same trajectory in the years ahead, but no company, after all, can promise how well it will fare in the future. Its prior performance, though, is an auspicious sign that management is adept at leading the company as technologies evolve. In addition, the fact that Trimble ended the first quarter of 2022 with a backlog of $1.7 billion bodes well for the future.
Where to plant the seeds of a growth investment?
While the term growth stock may suggest speculative investments that are fraught with risk, this is hardly accurate. Camtek, MP Materials, and Trimble are three companies that are generating revenue and profits, making them considerably less risky than growth companies that are in the pre-revenue phase of their development. Nonetheless, those who are most cautious about risk may be most drawn to Trimble, which has the longest history of success.
