Investing in stocks always presents the risk of serious loss. Capital preservation is of utmost importance to most conservative investors. Accordingly, growth stocks can often present risks and rewards that are outside of many investors’ comfort zones.
Fair enough.
In this environment, it’s perhaps even more important to assess the risk/reward relationship on specific growth stocks. That’s because uncertainty is increasing, driven by geopolitical risk, interest rate risk, and inflation-related risks.
For those looking for top growth stocks to manage their way out of this situation, here are three great options.
Top growth stocks: Spin Master
Spin Master (TSX: TOY) is a world-class global children’s entertainment company, operating in North America, Europe, and a range of other countries. Started as a toy company, Spin Master has transformed itself into a leader in a range of businesses.
This company has leveraged its in-house IP to create flourishing entertainment and digital games business segments. These businesses complement the company’s toy segment well and provide higher-margin growth and leverage for this company.
Over the long term, I think Spin Master’s ability to renew its IP pipeline and leverage its various business models will provide outsized returns. Accordingly, this is a growth stock to keep on the radar right now.
Open Text
Open Text (TSX: OTEX)(NASDAQ: OTEX) is a leading Canada-based software company with an impressive growth track record. This company has provided relatively consistent and steady growth, throughout the pandemic. As software adoption continues to pick up, Open Text stands to benefit from strong secular catalysts.
This company is also one of the few software firms that has chosen to pay a dividend. Additionally, Open Text has raised its dividend by an average of 13% per year over the past nine years. This has resulted in a dividend yield for investors around 2%. That’s generally unheard of in this space.
Over time, I expect Open Text’s earnings growth to continue to provide for fundamental improvement, driving both stock price growth as well as dividend growth over time. For investors seeking a long-term growth stock to buy and hold, Open Text is a great choice.
Constellation Software
Finally, we have Constellation Software (TSX: CSU). Constellation is a massive conglomerate of software companies acquired over decades of management. This company continues to acquire a range of vertical market software businesses and improve their fundamentals over time.
This business model has been extremely successful. Accordingly, it’s no surprise to see Constellation’s stock price chart represent the parabola every investor wants to see.
Whether this sort of compounding can continue indefinitely remains to be seen. However, Constellation’s ability to integrate smaller software companies into its portfolio does not seem to be limited. There are thousands of such opportunities waiting to be acquired.
All in all, any of these companies make great additions to a long-term investor’s growth portfolio.
