No investment is a sure thing. Every stock you buy comes with some risk. And without risk, there would be no opportunity for reward.
That said, some stocks have lower risks than others. Some also have bigger opportunities for rewards than others. Which picks offer the best risk-reward propositions right now? Here are my three highest-conviction growth stocks to buy in 2024.
1. Amazon
Amazon (AMZN 3.43%) certainly looks attractive from a risk perspective. It dominates the e-commerce market. Amazon's logistics and supply chain network is unsurpassed, giving the company an enviable moat.
The company also has a huge growth opportunity -- and not just in e-commerce. Amazon Web Services (AWS) ranks as the largest cloud services provider. Organizations will almost certainly continue racing to harness the power of artificial intelligence (AI). This should enable AWS to grow rapidly, even with stiff competition from Alphabet's Google Cloud and Microsoft's Azure cloud platform.
I like that Amazon has retained a start-up mentality in many ways. It continually looks at new markets to enter. For example, the company launched a supply chain management service last year and just began selling cars online. Jeff Bezos' statement from years ago that "your margin is my opportunity" remains a core component of Amazon's business model.
The stock is also a great pick to buy right now, in my view, because of its intense focus on improving profitability. Amazon's earnings more than tripled year over year in the third quarter of 2023. It expects Prime Video to become profitable in the not-too-distant future. I expect these efforts to show up in Amazon's quarterly results this year and provide nice catalysts that further boost its share price.
2. Brookfield Renewable
Brookfield Renewable (BEP 0.19%) (BEPC 0.09%) fully expects to deliver average total returns of between 12% and 15% per year. Those kinds of returns can double your money every five to six years. I'm confident the company will be able to achieve its goal over the long term, even though Brookfield Renewable's shares haven't performed well over the last 12 months.
If history is any guide, Brookfield Renewable will be able to pull it off. The renewable energy provider's average total return since 1999 is close to 16%. Its funds from operations (FFO) per unit have increased by a compound annual growth rate of more than 10% since 2012.
I have no doubt whatsoever that the demand for renewable energy will continue to rise over the next several years. For one thing, solar and onshore wind are now more cost-effective than coal and gas. Countries and major corporations across the world have also committed to aggressive carbon emission reduction goals that will be impossible to achieve without additional renewable energy.
But is Brookfield Renewable prepared to meet the increasing demand? Absolutely. The company's development pipeline capacity of 143,400 megawatts is more than 4.5 times greater than its current installed capacity. Brookfield Renewable also continues to expand via acquisitions. There are few companies with as sure-fire growth prospects, in my opinion.
3. Vertex Pharmaceuticals
You might be surprised to see a biotech stock on the list, considering the level of risk they face with potential pipeline setbacks. However, I'm highly optimistic about Vertex Pharmaceuticals (VRTX -0.06%) for several reasons.
The company enjoys a monopoly in treating the underlying cause of cystic fibrosis (CF). Its nearest potential rival is at best years away from even having a chance at competing against Vertex's products. In the meantime, Vertex could be on track to soon roll out its most powerful (and profitable) CF therapy yet assuming the upcoming late-stage results for its vanzacaftor triple-drug combo are positive.
Vertex and its partner, CRISPR Therapeutics, now have the world's first CRISPR gene-editing therapy on the market. Casgevy has already been approved in the U.S. for treating sickle cell disease with another approval decision for transfusion-dependent beta-thalassemia on the way in March. Analysts project the new therapy could generate peak annual sales of over $2.2 billion, with Goldman Sachs estimating Casgevy could rake in $3.9 billion.
I also like the prospects for non-opioid pain drug VX-548. Vertex plans to report results from three late-stage studies of the drug early this year, which could lead to near-term regulatory filings.
Sure, there's more risk with some of the company's other pipeline programs, including its cell therapies that hold the potential to cure type 1 diabetes. However, with multiple likely blockbusters largely de-risked and its dominant position in CF, I think that Vertex is a virtual shoo-in to deliver solid growth for years to come.
