A lot of UK investors prefer dividend shares over growth stocks. And that’s understandable, as the former are less volatile and also offer returns – in cash – in the near term.
Ignoring growth stocks can be a mistake however, especially for those with a long-term investment horizon. Because picking the right growth stocks can lead to life-changing returns.
With that in mind, here are three top growth stocks to consider today.
Enormous growth potential
When it comes to growth companies, it’s hard to look past Amazon (NASDAQ: AMZN). Over the last decade, this company has grown its annual revenues from $61bn to $514bn. And investors have made a ton of money as a result.
Looking at Amazon today, I still see a lot of growth potential. This is a company that now operates in a wide range of exciting industries, including online shopping, cloud computing, digital advertising, video streaming, self-driving cars, artificial intelligence (AI), and digital healthcare.
So I expect it to get significantly bigger in the years and decades ahead.
The downside to this stock is that it has a lofty valuation. Currently, the forward-looking P/E ratio using the 2024 earnings forecast is about 45.
This stock has always been expensive though. And a high valuation hasn’t stopped it from delivering huge returns in the past.
The ultimate online shopping stock
Another growth stock with bags of potential to my mind is Shopify (NYSE: SHOP).
It operates a subscription-based e-commerce platform that allows merchants to set up their own online stores easily and start selling goods and services quickly.
In my view, Shopify is the ultimate play on the online shopping growth story.
These days, new brands are popping up everywhere and stealing market share from existing brands. So investing in individual retailers has become quite dangerous.
With Shopify though, investors become a part-owner of the e-commerce platform that so many of these new brands are using to run their businesses.
So no matter which brands win in the long run, Shopify investors should do well.
This is another stock with a high valuation. So I expect it to be volatile. Taking a 10-year view however, I think it will provide strong returns for investors.
A play on 5G
Turning to the UK market, one stock I’m very excited about is Calnex Solutions (LSE: CLX). It provides testing services to the global telecoms industry.
Telecom networks are going to require a huge build out over the next decade to handle new technologies, such as self-driving cars and remote robotic surgery.
Ultimately, 5G is the key ‘enabler’ of a lot of these technologies. And right now, 5G coverage across many countries, including the UK, is very poor (I’m reminded of this every time I take a train trip across the UK and there’s no internet for half the trip).
So I think the backdrop for Calnex looks very supportive.
It’s worth pointing out that while Calnex has generated strong top-line growth in recent years, momentum has slowed recently as a result of the weak macro environment.
And it’s possible that growth could continue to be sluggish in the near term. But over the long term, I expect this founder-led company to produce strong returns for investors.
