Top Growth Stocks: 2 Obvious Bets for 2021

No growth stock is ever obvious, but companies like HEXO (TSX:HEXO)(NYSE:HEXO) and Shopify (TSX:SHOP)(NYSE:SHOP) beg for your attention.

| More on:
Woman has an idea

Image source: Getty Images

Nothing in the market is guaranteed, but some growth stocks seem obvious. Just remember these investments aren’t obvious to everyone. Instead, only those paying attention can capitalize.

If you want to own the best growth stocks of 2021, here’s your chance.

Pay attention to cannabis again

Cannabis was the top growth market of 2018. Anything that had to do with marijuana skyrocketed in value. We’re not talking small returns either. Many stocks doubled, tripled, or even quadrupled in value. All of that happened in a matter of months.

Then the cannabis bear market of 2019 occurred. The COVID-19 crisis of 2020 didn’t alleviate any of that pain, but in 2021, the market is set to turn a corner. Your best bet is HEXO (TSX:HEXO)(NYSE:HEXO).

Let’s first look at what fizzled this growth market a few years ago. Investors were betting on companies that could grow cultivation the fastest. Whoever produced the most marijuana received a higher valuation. I warned against this type of investing before the bear market arrived.

“Today, it’s not very profitable to grow staples like tomatoes, beans, rice, or cabbage. In another decade, there’s a chance that growing cannabis isn’t wildly profitable either,” I predicted. “Commoditization could be a lot closer than you think.”

Indeed, commoditization was closer than everyone thought. There still aren’t many sustainably profitable marijuana stocks, even if revenues still experience growth. That’s why HEXO is different.

“Think of HEXO as the Coca-Cola of pot,” I recently stressed. “It deals with a bunch of individual commodities, but it packages and brands those ingredients in a way that produces brand loyalty and sustainably high margins.”

Still trading well below its 2018 highs, HEXO is priced right for value-conscious growth investors.

This is my top growth stock

Few investors would call Shopify (TSX:SHOP)(NYSE:SHOP) stock cheap. It’s one of the priciest businesses on the market, at least when you look at the multiples. Yet time and time again, shares have proven worthy of their steep premium. Shopify stock has risen more than 40 times in value since going public in 2015.

What makes Shopify so special? It’s a platform business playing in one of the biggest growth markets in human history: e-commerce.

“At first glance, Shopify isn’t an Amazon competitor at all: after all, there is nothing to buy on Shopify.com. And yet, there were 218 million people that bought products from Shopify without even knowing the company existed,” explains tech consultant Ben Thompson.

Shopify is simply a platform. It built the infrastructure in which others can build on top of. This way, it takes a cut of all the sales that are processed on its platform without needing to drive those sales itself. It’s like a secret recipe for low-cost growth.

“The difference is that Shopify is a platform: instead of interfacing with customers directly, 820,000 3rd-party merchants sit on top of Shopify and are responsible for acquiring all of those customers on their own,” Thompson concludes.

Amazon remains nearly 20 times larger than Shopify despite their similarities. This “expensive” stock should continue to reward patient investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Shopify, and Shopify. The Motley Fool recommends HEXO. and HEXO and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Ryan Vanzo has no position in the companies mentioned.

More on Tech Stocks

edit Sale sign, value, discount
Dividend Stocks

3 Remarkably Cheap TSX Stocks to Buy Right Now

These three cheap TSX stocks are some of the best buys on the TSX, and yet their share price is…

Read more »

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

consider the options
Tech Stocks

Better Buy (2024 Edition): Shopify or Nvidia Stock?

Shopify (TSX:SHOP) isn't the only red-hot tech stock in town that could add to recent gains.

Read more »

Illustration of bull and bear
Tech Stocks

A Bull Market Is Coming: 3 Growth Stocks That Could Thrive

Given their high growth prospects and cheaper valuation, these three growth stocks would be an excellent buy as the market…

Read more »

online shopping
Tech Stocks

2 Stocks That Saw Major Black Friday Boosts

These stocks saw a pretty amazing Black Friday, a sign that both are probably going to be a great buy…

Read more »

Growing plant shoots on coins
Tech Stocks

2 Top Growth Stocks in Canada for December 2023

Here are two of the best Canadian growth stocks you can buy in December 2023.

Read more »

Dots over the earth connecting the world
Tech Stocks

Is Constellation Software Stock Worth a Buy in December?

Constellation stock (TSX:CSU) is up 46% in the last year alone, but after an earnings miss should investors still consider…

Read more »

Man data analyze
Tech Stocks

Beyond SPY Stock: Top U.S. Picks for Canadian Investors

Venturing beyond SPY stock opens up a world of investment possibilities for Canadian investors. Top U.S. picks include Apple.

Read more »