Large-cap stocks like the Big Seven have had a rough few months, leading some investors to question whether now is the best time to buy growth stocks. One investor said growth stocks still offer opportunities, but now is the time to be selective. “Generally speaking, growth stocks will continue to outperform value stocks,” Winthrop Capital Management portfolio manager Adam Coons told CNBC Pro in May. “But valuations are stretched, so we’re looking for higher quality stocks.” 1. Growth stocks are expected to grow rapidly but do not pay dividends and tend to be more expensive than so-called value stocks. For Coons, high-quality growth stocks “generate true free cash flow through lower debt, resilient earnings, strong balance sheets, and sustainable businesses over a 5-10 year time horizon.” model. When considering which stocks to buy, Coons emphasized the importance of valuation: “We need to ask what price we are really paying for the stock, not FOMO (fear of missing out) or just what it is. Stories of goals achieved. ” “I would stay away from growth stocks that do well because of their story and invest in those with real revenue and earnings growth. ” Here are three under-the-radar stocks that Coons is watching right now: PayPal Holdings Coons likes PayPal because it is “one of the cheapest names” in the digital wallet and fintech ecosystem. The stock is down about 80% from its 2021 peak and is down 3% in the past 12 months. “When I saw it, I saw it was cheap and it used different products to get customers into the habit of sticking with PayPal instead of using all the different wallets out there. So I liked the PayPal story,” Ku said Enns said. The company recently reported raising its 2024 adjusted profit growth forecast from flat to “mid-to-high single-digit percentage” growth. Coons said the company has also been investing in Venmo debit and credit cards, which has proven to be “important to PayPal’s growth strategy as it provides more ways to reach its large user base.” According to FactSet data, 22 of the 48 analysts covering the stock have buy or overweight ratings. Their average price target is $74.61, with potential upside of about 18%. SS & C Technologies Software-as-a-service vendor SS & C Technologies is another favorite of Coons, who values its market share. The portfolio manager said the company “has a wealth of data both from an investment security perspective and from its user base” given the duopoly nature of the industry. “As we look to the future, they will become one of the sources of big data,” he added. Shares of the software giant have risen about 14% in the past 12 months. FactSet data shows that 10 of the 12 analysts covering the stock have given it a buy or overweight rating, with an average price of $71.63. This gives it 13% upside potential. Another company Kuhn chose was the credit rating agency Moody’s, another company he likes because of its “vast amounts of data.” Portfolio managers believe the company uses artificial intelligence to make more efficient use of its data and ultimately monetize it more. The company’s first-quarter profit exceeded Wall Street expectations for strong demand for its products. Moody’s shares have risen about 30% in the past 12 months. Of the 24 analysts covering the stock, 13 have a buy or overweight rating and 11 have a hold rating. FactSet data shows the average price target is $408.73, with potential upside of about 3%.
