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Growth stocks remain unexploited. And as a fool, that suits me. The way I see it, it’s an opportunity to find bright companies on the cheap before any periods of weakness lose investor confidence.
Today I’m going to reveal three examples that will be taking places on my shopping list.
I have stock in fantasy image maker Games Workshop (LSE: GAW) and looking to add more.
Like most listed companies, the owner of the Warhammer 40,000 brand is facing a rough patch in 2022. Shares fell nearly 30% as stock markets disappointed.
I don’t see this situation changing anytime soon. As with other retailers, games can suffer when legions of fanatical followers prioritize paying their bills. For this reason, the next update from FTSE 250 A member can make for a solid read.
For someone with a longer timeline, however, I think a price-to-earnings (P/E) ratio below 19 is already worth a lot. In terms of the quality of the main business. The attractions here include big margins, a seriously strong balance sheet, a dominant position in the market, and plenty of scope to push its valuable IP in new directions.
Next on the shopping list is an energy solutions provider. XP power (LSE: XPP) It’s another firm whose shares are down nearly 65% in 2022. Still, I wonder if the market got overly pessimistic here.
Don’t get things wrong now they are. Unfortunately for XP Power, revenue growth in China due to the Covid-19 outbreak has been halted due to component shortages and the impact of the Covid-19 pandemic. Seeing a rapidly growing pile of debt is not something I like.
Again, I assume this is already reflected in the price. AP/E can prove amazing value when it comes back to 10 good times. And given how important the company’s products are, I think the chances of this happening are very high. In the year It had a record order book of £285m in the second half of 2022.
In the meantime, there’s a 5.2% dividend to reinvest back into the market (and possibly the company from which this cash was acquired).
The third growth stock I would like to invest in is a premium tonic water filter. Fragrant drinks (LSE: FEVR) Shares have fallen nearly 70% by 2022, a toxic mix of increased costs, labor shortages at the pond and fewer glasses.
Are there any constants from these headwinds? i don’t think so. And this is where my silly feelings started. Ignoring the stock price movement, I think this is a great company with a strong premium brand that is rapidly developing a following in the US.
But there is a problem. Fevertree shares trade at 40 p/e. In terms of value, that’s a (much) punch as margins have been squeezed so much in recent years. And with wallets getting tighter, a bad 2022 could easily turn into a tough 2023.
On the flip side, Fevertree boasts strong finances to weather the storm. and when the power values do Stable and rational income will go back, I see drinkers pushing the boat out again.
Do I buy before then? I just might be able to!