Poker players must continually evaluate their risks versus potential rewards. They adjust their bets based on the strength of the cards they're dealt. When they have an especially strong hand, they put more chips on the table.
It's a similar story with investors. The big difference, though, is that you get to pick your cards (stocks) instead of having them dealt to you. Just like poker, you can turn a small amount of money into a lot of money if you play well. If you've got $3,000, here are three growth stocks to double up on right now.
Amazon (AMZN 1.21%) has gotten off to a great start this year, with shares jumping around 16%. However, those gains need to be put into perspective. The stock remains down more than 40% below its 52-week high.
There are two main reasons behind Amazon's weak stock performance. First, the company's growth has slowed as customers tightened their spending in the midst of soaring inflation and economic uncertainty. Second, Amazon's bottom line has taken a hit because of its surge in spending in recent years.
The first issue is largely out of Amazon's control. However, it's only a temporary headwind that will be resolved when the economic outlook improves. Amazon is taking the bull by the horns on the second issue, though, by cutting spending. The company's profits and free cash flow should improve dramatically in the near future.
Over the longer term, Amazon has multiple key growth drivers. Even with increased competition, its Amazon Web Services cloud-hosting unit has a massive growth runway. And while other companies are at the center of attention with their artificial-intelligence (AI) advances, don't overlook Amazon's own AI push.
2. The Trade Desk
Shares of The Trade Desk (TTD 1.34%) are sizzling hot in 2023. The adtech stock has soared close to 30% year to date. However, The Trade Desk still has a long way to go to reclaim its previous high set in late 2021.
The digital advertising industry is in a slump right now. You wouldn't know it based on The Trade Desk's performance, though. The company's revenue grew 24% year over year in the fourth quarter of 2022. Its profits were nearly nine times greater than in the prior-year period.
The Trade Desk is growing three times faster than the overall adtech industry. This underscores how attractive the company's online platform is for advertisers and advertising agencies seeking to place digital ads in the best spots to get the most bang for their buck.
Sure, The Trade Desk has a lofty valuation, with shares trading at nearly 56 times expected earnings. But the shift from linear advertising to digital advertising and the boom in connected TV present huge growth opportunities for the company. I think The Trade Desk will seize those opportunities and this stock is worth the premium price.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 3.14%) stock lags behind Amazon and The Trade Desk so far this year with a low single-digit percentage gain. However, the biotech stock jumped more than 30% in 2022, while the overall market sank.
The company's revenue growth from its cystic fibrosis (CF) franchise is slowing. But Vertex has multiple catalysts on the way that could lead to renewed momentum.
The first could come later this year. Vertex and partner CRISPR Therapeutics await European approval for exa-cel in treating sickle cell disease and transfusion-dependent beta-thalassemia. The two partners are also close to wrapping up their rolling submission to the U.S. Food and Drug Administration for the gene-editing therapy.
Vertex also is preparing for a couple of other near-term commercial launches. VX-548 is a non-opioid pain drug in late-stage testing. The company expects to complete its pivotal study of the drug by late 2023 or early 2024.
It's also evaluating the vanzacaftor triple-drug CF therapy in a phase 3 study. This combo holds the potential to be Vertex's most powerful CF therapy ever. It could also be more profitable than previous drugs, thanks to significantly lower royalties.
That's not all, though. Vertex's inaxaplin is also in pivotal development. The experimental drug targets APOL1-mediated kidney disease, an indication that affects more patients than CF does. Vertex also is moving forward with an early-stage program that holds the potential to cure type 1 diabetes.
All drugmakers face the risk that their clinical trials could flop. However, I think the prospects for Vertex look bright.