Growth stocks with major industry tailwinds behind them and leading positions in their respective markets can provide life-changing returns for investors. And there are two companies that I think stand above the rest.
Moderna (MRNA 13.67%) is a leader in mRNA technology that proved effective against COVID-19 and has a large pipeline of products in the works. Taiwan Semiconductor (TSM 1.61%) is a leading chip foundry with the technology and business model to dominate for decades. Here's a look at why these are my top growth stocks right now.
Changing medicine forever
In early 2020, few people outside of medicine had heard of Moderna. The company had developed an mRNA product that was wonderful in theory but had yet to be proven at scale. All that's happened since then is the fastest development of a new vaccine on record. Plus, Moderna's business went from zero to over $20 billion in revenue in the past year.
MRNA Revenue (TTM) data by YCharts.
Despite the success, investors are worried that COVID-19 revenue will decline and so will earnings, which is a fair criticism of the stock. But you can see that Moderna's stock now trades for just 6.4 times earnings, and the company will likely generate revenue from COVID-19 vaccines for years and has another 33 vaccines in development, including nine for ailments with no vaccine.
MRNA Revenue (TTM) data by YCharts
Now that Moderna's technology has proven scalable, I think we'll see more advances in the future. It took only two days in January 2020 (two months before most Americans were aware of the virus) to design its COVID-19 vaccine. That shows how powerful the company's technology can be, and while clinical approvals for subsequent products won't be as quick, there are now no questions about whether or not mRNA vaccines work.
Investors who get into Moderna now are getting in at a value price for a stock that may have a long growth runway.
The quiet powerhouse
There's one company at the center of the world's most advanced companies. Apple's iPhones and Macs, Nvidia's chips, and even Advance Micro Devices' (NASDAQ: AMD) chips are all made by TSMC. It's the go-to foundry (manufacturer) for custom chips around the world.
The company's position has led to tremendous growth in both revenue and earnings, as you can see below. But a recent pullback in the stock means shares are a better value than at any time since 2015 with shares trading for only 12.6 times earnings.
TSM Revenue (TTM) data by YCharts.
The reason I think TSMC is well positioned to continue growth is the lead it has over competitors in leading-edge chip manufacturing. Intel is still years behind in its manufacturing technology, and smaller competitors like GlobalFoundries and China's SMIC don't have the technology or scale to compete right now. Any company trying to match TSMC will have to spend tens of billions of dollars and years building out capacity.
Investors don't like high capital expenditure businesses like this generally, but I think this will be a company that can generate strong returns on investment for the foreseeable future.
Growth stocks for the long haul
Moderna and TSMC are companies that will continue to grow and develop for years, so investors need to have the right mindset with these investments. Prices can be volatile, and results may be choppy, but long term, these companies will be transformational for the world, and that should result in strong returns for investors.
