Growth stocks are not all made equally. One investor may lean toward growth but also have reasons to be a bit less aggressive. Another investor may be perfectly fine swinging for the fences at every opportunity. Finally, another investor may wish to beat the market while taking on as little risk as possible. Although these three investors may see some overlap in the stocks they buy, there are stocks that make more sense for each of them to hold. In this article, I discuss three growth stocks for three different types of investors.
A growth stock for the aggressive investor
If you’re the type of investor that’s perfectly happy swinging for home run stocks at every opportunity, then consider investing in WELL Health Technology (TSX:WELL). The company operates primary health care clinics and offers a suite of telehealth solutions. One of WELL Health’s main software offerings is its electronic medical record (EMR) software. As of last month, WELL Health supported more than 2,800 clinics across Canada on its EMR network.
The reason this stock makes more sense for the most aggressive investors is that the telehealth industry is still very early in its adoption. There’s no denying that the development of telehealth solutions would greatly benefit society. The fact that we’re able to seek medical attention without having to leave our homes is amazing. However, it’s still unclear how long it’ll take for these services to become widely adopted. Until that happens, WELL Health’s stock could be very volatile.
The global telehealth industry is expected to grow at a compound annual growth rate (CAGR) of 37.7% from 2020 to 2025. If WELL Health can continue to lead the Canadian telehealth industry, it could become a massive winner.
A blue-chip stock that can beat the market by a wide margin
Investors who are interested in a great growth stock, but wish to invest in a slightly less risky situation should consider Shopify (TSX:SHOP)(NYSE:SHOP). The reason I believe Shopify is a less risky company is that the e-commerce industry has already seen a massive spike in adoption. This was true even before the pandemic. In 2019, online retail accounted for about 4% of all Canadian retail sales. By early 2020, the industry represented more than 11% of all Canadian retail sales. That’s nearly three times in about a year.
The risk that comes with Shopify is its valuation. As of this writing, Shopify is valued at a market cap of $241 billion. That makes it the largest company in Canada, by market cap. It’s very hard to see the stock producing a 10 times return over the next decade. In addition, Shopify’s meteoric growth over the past six years suggests a correction may be in order. However, as consumers continue to shift towards online retail, Shopify should continue to see growth. I believe Shopify will be the first Canadian company to hit a $1 trillion market cap.
Are you an investor with low risk tolerance? You can beat the market too
Investors that want to beat the market while taking on the least amount of risk should consider investing in the Evolve FANGMA Index ETF (TSX:TECH). This is essentially like buying a basket of companies. However, the basket of companies you’re buying includes some of the largest companies in the world. This ETF tracks the performance of the six big tech companies in the United States, including Meta Platforms, Amazon, Netflix, Google, Microsoft, and Apple.
This is one of, if not the only, ETF available on the market that only tracks these six companies. Previously, investors would have had to buy shares of the S&P 500 Composite Index, which is heavily weighted toward these six stocks. While that could produce similar returns, a growth investor would appreciate this ETF a lot more. To put it simply, these six companies aren’t going anywhere any time soon. You can’t go wrong with this one.
