The stock market has a plethora of options to choose from. The same stock can give enormous growth to one investor and a loss to another, depending on how and when they invest. When you look at the stock market searching for the best buy for that moment, first understand what you want from your money. The best stock to buy depends on your expectation and risk-taking capacity.
Do you want your money to give you a regular payout, or do you want the money to grow over the mid- or long term?
Things to consider when buying a stock
When looking for the stock, see if it is at its all-time high. Understand its fundamentals — revenue growth and net debt — and how it makes money. And lastly, find a reason why you are buying the stock. If your reason is that everyone is buying it, then you are falling prey to herd mentality.
Herd mentality is not knowing what you are doing but still doing it because everyone is doing it. Your likes, preferences, and choices are influenced by others and not what you really want. As Warren Buffett says, “Risk comes from not knowing what you’re doing.”
Here is a growth stock you can consider buying today after understanding the above considerations.
Best stock to buy for growth
If you are looking for more than 20% returns, consider investing in Magna International (TSX:MG) through a Tax-Free Savings Account (TFSA). The TFSA allows your investment to grow tax-free. It means you can sell the stock when it peaks and buy another stock with that money without being taxed.
Magna International is among the largest automotive components suppliers in the world. But I am bullish on its contract manufacturing capacity. Magna has been building factories to assemble cars for automakers. The growing functionality and features are making it increasingly complex to make cars. Even tech companies are jumping into the automotive space to design fully autonomous cars. As the trend in tech goes, there is a design company and a manufacturing company that develops and maintains advanced factories capable of producing advanced products.
With faster product updates, cost optimization would be the need of the hour, and Magna wants to tap that trend. While this trend will take some time to pick up, now is a good time to buy Magna stock while it still trades closer to its pre-pandemic levels of over $78.
Another way to look at the $78 price is it is 37% below Magna’s all-time high in June 2021, when the stock rose on the electric vehicle (EV) momentum.
Its stock fell since then as the electric vehicle (EV) market ran into one of its worst chip supply shortages, followed by high inflation and interest rate that affected EV demand. However, the chip supply shortage has eased, and Magna reported an 11% year-over-year growth in first-quarter revenue. It even increased its 2023 revenue outlook to $41.8 billion (up 5%). The last time its annual revenue surged was in 2021, when the stock made a high of $125.
What to expect from Magna?
Magna stock could surge 30-50% to surpass $115 in the coming two years, as EV momentum returns. You can consider buying this stock for EV growth and sell it once it reaches this level. Or you can hold it for the contract manufacturing secular trend. In the meantime, the stock will also give you a 3% annual dividend yield.
If you ask me, I would buy 50 shares of Magna for around $3,900-$4,000, sell 25 of them after the EV growth, and hold the remaining 25 for the long term.
