At the risk oversimplifying things, the idea behind buying growth stocks is that you are making an investment in the stock of a company that you are reasonably confident will be significantly bigger in five or even 10 years compared to when you made your investment. From there, you can dive a little deeper. Companies typically get bigger by growing their revenues, or the “top line,” which can happen a couple of different ways. Sometimes a company is delivering a superior product that is allowing it to take market share from other competing companies in its industry. See Apple Inc….
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At the risk oversimplifying things, the idea behind buying growth stocks is that you are making an investment in the stock of a company that you are reasonably confident will be significantly bigger in five or even 10 years compared to when you made your investment.
From there, you can dive a little deeper.
Companies typically get bigger by growing their revenues, or the “top line,” which can happen a couple of different ways. Sometimes a company is delivering a superior product that is allowing it to take market share from other competing companies in its industry.
See Apple Inc. (NASDAQ:AAPL) as a recent example; by delivering a product that was more desirable to customers, the company overtook BlackBerry Ltd. (TSX:BB)(NYSE:BB) as a the leading manufacturer of smartphone technology.
BlackBerry, meanwhile, has moved on from manufacturing mobile handsets; it’s now attempting a big push with its QNX software, but that’s a different story altogether.
The other option for companies and investors pursuing an above-market trend of growth is to be involved in industries that are experiencing above-market growth rates.
This would be the case of Netflix, Inc. (NASDAQ:NFLX), which virtually pioneered its own over-the-top streaming technology to exploit the opportunity of millennials who were increasingly cutting the cord and shifting away from traditional mediums like cable television.
But thankfully, there are options north of the border as well.
These three companies offer outstanding growth potential to investors today, either through participation in a growth industry, taking share from competitors, or offering an opportunity for untapped potential.
Despite a strong surge from Aurora Cannabis Inc. in 2017, Canopy Growth Corp. (TSX:WEED) is still Canada’s largest marijuana producer by market capitalization.
Size is the gift that keeps on giving, and investors’ favour towards the Smith Falls-based producer will only serve to allow the company to continue to make strategic acquisitions and invest in production capacity.
Management is on record as saying they are going to be aggressive in securing market share throughout the first few years of marijuana legalization, so you should feel assured that your money is safe with Canopy.
Shopify Inc. (TSX:SHOP)(NYSE:SHOP) would definitely fit into the category of being a company and stock that has been benefiting from the continued adoption of e-commerce and online shopping.
In 2017, the company experienced 73% top-line growth, and Shopify stock responded accordingly as well, with shareholders being the beneficiaries of a three-fold rise in the company’s share price last year.
Despite that, Shopify stock has recently given back some of those gains as of late, making now an opportune time to make your move on the company.
Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is a little different. Despite offering outstanding growth potential by way of a largely untapped asset base, Crescent Point shares also offer attractive “value” qualities as well.
Crescent Point stock trades at just a 0.58 times price-to-book ratio, while offering shareholders an attractive 3.58% dividend yield, meaning that if oil prices were to continue on their current trajectory, this one could turn out to be a real winner.
5 stocks we like better than Aurora Cannabis Inc.
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Iain and his team just revealed what they believe are the five best stocks for investors to buy right now… and Aurora Cannabis Inc wasn’t one of them! That’s right – they think these five stocks are even better buys.
*returns as of 5/30/17
David Gardner owns shares of Apple and Netflix. Tom Gardner owns shares of Netflix and Shopify. The Motley Fool owns shares of Apple, BlackBerry, Netflix, Shopify, and SHOPIFY INC and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. BlackBerry and Shopify are recommendations of Stock Advisor Canada.