There's nothing like a good growth stock -- tied to a company growing at a faster-than-average rate. Many growth stocks have made investors much richer, though not every growth stock will turn out to be a winner.
Here are four growth stocks to consider, each of which has a promising future and a reasonable recent valuation. See which one(s) are a good fit for your long-term portfolio.
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1. Nvidia
It's hard not to notice Nvidia (NVDA -0.44%) these days, as it has posted boffo gains over many years. Over the past 15 years, it has grown at an average annual rate of 56.1%, enough to turn $1,000 into more than $790,000! Over the past three years, it has averaged annual gains of 116.5%.
Better still, it's not even seeming overvalued at recent levels, with a forward-looking price-to-earnings (P/E) ratio of 41, roughly on par with its five-year average of 39. Nvidia has plenty of growth potential left, as it's become a key supplier of semiconductor chips for data centers (used heavily for artificial intelligence (AI) computing, among other things. Indeed, Nvidia's data center business has exploded from $3 billion to $115 billion in annual revenue over just five years, with more growth expected.
2. Alphabet
Like Nvidia, Google parent Alphabet (GOOG -0.30%) (GOOGL -0.27%) is among the "Magnificent Seven" fast-growing giants. Alphabet is home to not only the dominant Google search engine, but also the YouTube video platform, the Chrome browser, the Nest suite of smart home products, the Android operating system, the Google Cloud Platform, and more.
Alphabet has become a leader in (AI), as well, incorporating it into offerings such as search. It's also a major player in cloud computing, with its Google Cloud. It has become a dividend-paying stock now, having initiated a payout in 2024 and recently increasing it by 5%.
Some worry about Alphabet being broken up due to antitrust concerns, but that's not necessarily bad for shareholders, who may end up owning all the pieces, which could be worth more separately. Meanwhile, the stock's valuation is attractive, with its recent forward P/E of 20, below the five-year average of 22.
3. Waste Management
Waste Management (WM 0.87%) is a growth stock? A trash collection and recycling specialist? Yup, it is. Consider this: Over the past 15 years, it has averaged annual gains of 14.4% -- and over the past five years and 10 years, it has averaged more than 17%.
Waste Management should be appealing if you're at all worried about an economic slowdown or recession, as its business is fairly recession-resistant. People might put off going on vacation or buying a new refrigerator when they're financially stressed, but garbage collection will go on.
With a recent forward P/E of 30, a bit above the five-year average of 27, Waste Management's stock seems only slightly overvalued. It's not easy to catch the shares when they're undervalued, so if you're a long-term believer, you might want to consider buying a few shares.
Another plus for the company is its dividend yield, recently 1.4%. That may not seem like a lot, but it's been growing briskly. The total annual payout was recently $3.15, up from $2.18 in 2020 and $1.54 in 2015. Waste Management offers both growth and income.
4. Vanguard Information Technology ETF
Finally, there's the Vanguard Information Technology ETF (VGT -0.58%). It's technically not a common stock; it's an exchange-traded fund (ETF) -- a fund that trades like a stock. So you can buy shares of it from any good brokerage. This ETF will instantly have you invested in more than 300 stocks, each of which is in some way a tech stock. Its top holdings include Nvidia, Microsoft, Apple, Broadcom, and Palantir Technologies.
Here's why I'm suggesting you consider it as a growth stock: Over the past five years, it has averaged annual gains of 18.4%. Over the past decade and the past 15 years, its average annual gains have been 21.5% and 19.6%, respectively. This is one high-performance ETF.
So, give any or all of these suggestions some consideration for your long-term portfolio. Do keep in mind, though, that should the market suffer a pullback (as happens every now and then), growth stocks will often pull back more sharply than their value-stock counterparts. If you can't handle some volatility, think twice before focusing on growth stocks.
And remember that for some or all of your long-term dollars, you can do quite well just sticking with a simple S&P 500 index fund, too.
