Volatility has been the name of the game since this decade began. The S&P/TSX Composite Index has seen new all-time highs in just a few years and some incredibly volatile up and down movements. As of this writing, the primary Canadian benchmark index is down by around 5% from its latest all-time high set in March 2022.
While that might seem disappointing to some Canadian investors, long-term investors can look at this as an opportunity to purchase high-quality stocks at a perceived bargain.
While volatile, investing in growth stocks can be an excellent way for investors to capture high growth and high rewards. A word for the wise: investing in just any stock exhibiting rapid upward price movement is reckless.
To make the most of a growth-focused investment strategy in your self-directed portfolio, it pays to look deeper at individual stocks to identify whether they offer relatively reliable growth potential.
Today, I will discuss two high-quality growth stocks that likely belong to that category of growth stocks.
WELL Health Technologies
Investing in tech stocks became the go-to approach for growth-seeking investors, especially amid the boom at the turn of this decade.
WELL Health Technologies (TSX:WELL) emerged as a major beneficiary of the broader uptick in the sector, especially due to its role during the COVID-19 pandemic. WELL Health is a $876.63 million market capitalization multichannel digital health technology company.
Headquartered in Vancouver, it also operates the largest outpatient health clinic network in the country. It also owns and operates several primary healthcare facilities in Canada and the U.S., providing EMR services to doctors and clinics in Canada.
As a growth stock, it has done well. The last several quarters have seen it deliver record results, reporting a 40% increase in its revenue in the third quarter (Q3) of 2023.
That said, the company’s performance on the stock market has been quite volatile. Due to broader market challenges, the company’s debt load was bound to create challenges. However, WELL Health is revolutionizing the healthcare industry, requiring taking on debt.
As it continues to improve its offerings, the company will likely perform better on the stock market. As of this writing, it trades for $3.66 per share, down by 37.54% from its May 2023 high.
Hammond Power Solutions
Hammond Power Solutions (TSX:HPS.A) is a little-known Guelph-based firm with a $1.19 billion market capitalization. It is a company that designs and manufactures custom electrical magnetics, cast resin, custom liquid-filled distribution, and power transformers.
It also makes standard electrical transformers. Boasting manufacturing plants in Canada, the U.S., Mexico, and India, it serves electrical and electronic industries in these countries.
The company is the largest manufacturer of dry-type transformers in North America. It supplies various industries, giving it an excellent defensive appeal.
The last five years have seen a worldwide surge in the demand for power transformers, resulting in rapidly growing revenue for the company. Q3 2023 saw its backlog increase by 40% year over year, spelling great news for its growth. As of this writing, HPS.A stock trades for $99.66 per share, up by a massive 308.44% from its 52-week low.
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Foolish takeaway
The Canadian benchmark index saw a significant uptick in the last quarter of 2023 that continued into 2024. The possibility of key interest rates being slashed by the U.S. Federal Reserve and Bank of Canada were the primary contributors to the hopeful investor sentiment. However, the Federal Reserve is likely to keep interest rates elevated in light of U.S. consumer data being hotter than expected.
With the Canadian economy being tied closely to the U.S. economy, higher interest rates across the border might impact the market here as well.
Considering the performance of WELL stock and HPS.A stock in their respective industries, the two appear to be excellent holdings to consider for growth investors. However, lower-risk-tolerance investors might want to consider waiting for a pullback to establish positions in the stocks at lower rates.
