Whether you're a beginner or a seasoned investor, having a list of potential investments can help you stay organized and on track with your financial goals. These days, I have several exciting growth stocks on my own buy list.
Here are some promising examples from my current buy list, and what it would take to make me push the "buy" button for these stocks.
The usual suspects
First, I am always prepared to add more cash to the stocks I already own -- if a terrific buying window opens up. In 2022, I have doubled down on my investments in Netflix (NFLX 4.17%), Roku (ROKU 5.41%), The Trade Desk (TTD 4.15%), and Duolingo (DUOL 7.28%) in order to take advantage of downright unfair price drops.
Netflix and Roku are transforming the entertainment industry as we speak. The Trade Desk has a better grip on effective online marketing campaigns than anybody. Duolingo wants to teach the world to speak different languages at first, moving on to other fields such as history, math, singing, and underwater basket weaving over time.
All of these companies are long-term growth stories, with many years or even decades of money-making success ahead. They are already trading at attractive discounts from recent highs, ranging from Duolingo's 37% price drop to Roku's 83% fire sale, but the market can still make even bigger mistakes.
I'm already firmly convinced that these four companies stand on solid financial ground with robust business plans for the long run. The main thing I'm looking for here is another round of price drops based on nothing more than a market-wide retreat from high-octane growth stocks. We saw this comedy of errors play out this year, and it might happen again in 2023 or 2024.
So I'll gladly be there to pounce on those opportunities, given the chance.
Looking for new blood
At the same time, I have to keep an eye out for fantastic companies and promising stocks that haven't made their way into my portfolio yet. Right now, I'm keeping a close eye on these tickers while my finger hovers just above the "buy" button.
Cloud-based collaboration and project management software maker Atlassian (TEAM 2.66%) has been on my radar for years, delivering impressive top-line growth with a minimal marketing budget that lets product quality do all the talking. Trailing revenues have quadrupled in five years, while free cash flows tripled.
Atlassian will make me a buyer if the next couple of quarterly reports prove that the company can keep the financial growth going despite macroeconomic pressure. Unfortunately, the gloomy guidance management offered in November cast some doubt over that crucial quality.
Digital payments specialist Block (SQ 5.04%) is also in the penalty box for me. With former Twitter CEO and co-founder Jack Dorsey installed as chairman and CEO, the company has taken a sharp turn into the cryptocurrency market. For some investors, this strategy shift makes Block a comfortable entry point into crypto investments, but I already have plenty of exposure to blockchain businesses.
At the same time, I can't really argue against Block's skyrocketing business growth, based on the popular Cash App and the merchant-friendly Square platform.
I really want a simplified business model, where I could invest directly in the company's payment solutions without the potential cryptocurrency headache. Remember, I'll take advantage of the next crypto market upswing through my direct ownership of assets like Bitcoin (BTC 0.26%) and Ethereum (ETH 0.55%). Otherwise, the stock is trading near multiyear lows, and a continued price drop just might convince me to take a chance on Block anyway.
Is AMD really unmoved by crypto risks?
Semiconductor designer Advanced Micro Devices (AMD 2.44%) has been tremendously expensive in recent years, often with double-digit price-to-sales ratios and a triple-digit price-to-free cash flow ratio. Granted, AMD has earned those lofty valuation ratios by producing stellar growth across the board. I mean, these financial gains are nothing short of stellar:
AMD Revenue (TTM) data by YCharts
I used to think that AMD was too dangerous even for my risk-tolerant blood, for two reasons:
- The stock's valuation demanded absolute perfection, never giving AMD any margin of error for the next product launch or manufacturing process update. The company has had too many stumbles in its past -- admittedly under different management teams.
- Furthermore, surging sales of high-end graphics cards seemed too closely correlated with rising Ethereum prices, as those cards were tremendously effective for mining Ethereum tokens, with Ethereum's shift to proof-of-stake transactions spelling a guaranteed end to that gravy train. At the same time, management made every effort to distance AMD's results from the crypto market; I couldn't justify a sky-high valuation behind that ominous pairing of risks.
So AMD's stock is getting cheaper, CEO Lisa Su is making up for the many mistakes of her predecessors, and the end of Ethereum mining has not resulted in warehouses full of unsold graphics cards -- yet. The holiday season should provide all the evidence I need for or against my theory of game-changing crypto risks. I'll look closely at AMD's next earnings report in four weeks, and maybe I'll take a bite if AMD's sales turn out to be robust in the fourth-quarter's holiday shopping season.
