The Best Growth Stocks to Buy Now

When will the AI bubble burst, and what consequences will it have? Find out how to find growth stocks against a challenging environment of high interest rates, low growth rates, ongoing tariff uncertainty, and a dash of central bank worries.

Many analysts forecast muted economic growth over the coming months, while a few believe a mild recession is possible. Equity markets have advanced strongly during the second and third quarters of this year, driven by a dangerous AI bubble.

What are Growth Stocks?

Growth stocks refer to publicly listed companies that have higher growth rates than their peers, driven by a competitive advantage and a loyal client or customer base. They pay little to no dividends but compensate patient investors with capital gains over the long term.

Why Should you Consider Buying Growth Stocks?

Investing in growth stocks offers exciting stories, disruptive technologies and services, as well as portfolio diversification.

Below are three reasons you should consider adding growth stocks to your portfolio:

• Growth stocks continue to outperform value stocks and the broader market.
• A dovish Federal Reserve could boost growth stocks.
• The best performing growth stocks are at the cutting-edge of technology and fuel trends in AI and healthcare.

Here are some criteria to consider:

• Stocks with recent quarterly and annual earnings growth of over 15% (you can adjust this threshold to your liking, for example, 20% or 25%).
• Companies with new, game-changing products and services (for example, AI and its supportive infrastructure like semiconductors, data centers, utilities).
• Unprofitable companies or recent IPOs that disrupt the industry and generate tremendous revenue growth on their way to profitability.
• Stocks in leading industry groups like technology, software, and healthcare.
• Companies with institutional support backed by deep pockets.

What are the Downsides of Growth Stocks?

Growth stocks are facing increased volatility, and investors cannot rely solely on dividends to weather the storm. Competition is high, and today’s growth stock winner could be tomorrow’s loser. Higher interest rates are also a threat to growth stocks, which often carry higher debt levels to fund their capital-intensive business models.

Here is a shortlist of currently attractive growth stocks:

• Micron Technology (MU)
• Dell Technologies (DELL)
• Fluor Corporation (FLR)
• Alibaba (BABA)
• Opendoor Technologies (OPEN)
• Rocket Lab Corporation (RKLB)
• Power Solutions International (PSIX)
• Amazon.com (AMZN)
• Hesai Group (HSAI)
• Bloom Energy Corporation (BE)

Update on My Previous Best Growth Stocks to Buy Now

In our previous installment, I highlighted the upside potential of Micron Technology and Dell Technologies.

Micron Technology (MU) - A long position in MU between $105.53 and $114.81.

MU skyrocketed nearly 70% since my buy recommendation, and I have closed my trade. While MU might extend its rally, I am wary of the AI bubble, and I have begun trimming my exposure.

Dell Technologies (DELL) - A long position in DELL between $120.66 and $131.88.

DELL surged almost 20%, which was more than enough for me to exit my long trade. The technical picture flashes bearish signs, and I will re-evaluate DELL once I believe the correction has run its course.

Fluor Corporation Fundamental Analysis

Fluor Corporation (FLR) is an engineering and construction firm. FLR designs cutting-edge projects, like nuclear plants, LNG export facilities, missile sites, and post-war construction. It offers maintenance services for facilities, nuclear waste cleanup projects, and other environmental work. It is also a member of the S&P 400 index.

So, why am I bullish on Fluor Corporation despite its 27%+ post-earnings slump?

I buy the diverse business mix of Fluor Corporation, and the current valuations are ridiculous. The sell-off following its latest earnings reports was a severe overreaction, as the outlook for FLR remains bright, despite rising stagflationary concerns. It also holds a majority stake in the nuclear startup NuScale Power. The return on assets and profit margins lead the industry, and its most recent order backlog exceeds $28 billion.

Fluor Corporation Fundamental Analysis Snapshot

The price-to-earning (P/E) ratio of 1.78 makes FLR an inexpensive stock. By comparison, the P/E ratio for the S&P 500 is 30.26.

The average analyst price target for Fluor Corporation is $49.89. It suggests moderate upside potential with decreasing downside risks.

Fluor Corporation Technical Analysis

Fluor Corporation Price Chart

• The FLR D1 chart shows price action breaking out across its ascending Fibonacci Retracement Fan.
• It also shows Fluor Corporation inside a bullish price channel.
• The Bull Bear Power Indicator turned bullish with an ascending support level.

My Call on Fluor Corporation

I am taking a long position in Fluor Corporation between $41.61 and $43.82. The valuations, price-to-book ratio, and the PEG ratio are among the most appealing buy signals I have researched this year. The order backlog is excellent, and FLR has industry-leading business metrics. The NuScale Power stake is a significant bonus.

Amazon.com Fundamental Analysis

Amazon.com is one of the Big Five US technology companies and a leader in the global AI race and cloud computing sector. It has excellent profit margins, but its debt remains excessive. AMZN is an industry disruptor but faces stiff competition from China. It is also a member of the NASDAQ 100 index, the Dow Jones Industrial Average, the S&P 100, and the S&P 500.

So, why am I bullish on AMZN despite its breakdown sequence?

Amazon.com is a leader in AI, cloud computing, and e-commerce. I also appreciate the launch of its private label grocery store and the financial backing of an electric aircraft IPO. Its valuations are high, but well below its five-year average. AMZN has excellent operational statistics, and I see further gains for its AWS unit.

Amazon.com Fundamental Analysis Snapshot

The price-to-earnings (P/E) ratio of 33.90 makes AMZN a reasonably valued stock, especially for an AI play. By comparison, the P/E ratio for the NASDAQ 100 index is 33.36.

The average analyst price target for Amazon.com is $266.56. It suggests good upside potential with acceptable downside risks.

Amazon.com Technical Analysis

Amazon.com Price Chart

• The AMZN D1 chart shows price action below its ascending Fibonacci Retracement Fan.
• It also shows Amazon.com bouncing off the upper band of its horizontal support zone.
• The Bull Bear Power Indicator is bearish, with an ascending support level, and is approaching a bullish crossover.

My Call on Amazon.com

I am taking a long position in AMZN between $216.47 and $224.20. While I cannot rule out further downside, current levels are ideal for a dollar-cost-averaging entry into this AI, cloud computing, and e-commerce powerhouse.

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