I’m always searching for explosive stocks, or at least growth stocks with upside potential that can beat the market over a relatively long period of time. Indeed, I’m sure most readers would find themselves in the same boat. Putting together even three or four such positions in a portfolio can provide the sort of edge that can take one’s portfolio to the next level, or at least market-beating returns.
As we turn the page on October, here are two stocks I think have explosive growth potential that are worth considering right now. If the market does take a turn lower, this thesis would certainly be enhanced further.
Let’s dive in.
Source: Getty Images
Shopify
Shopify (TSX: SHOP) is one of the world’s largest e-commerce platforms. Headquartered in Ottawa, the company operates a proprietary platform that enables small and large merchants to operate online stores. Shopify’s platform provides a range of services, including payments, marketing, inventory management, analytics, and customer engagement tools.
With several million merchant customers, Shopify maintains its competitive position as a dominant player in the world of e-commerce. Indeed, for any business looking to set up shop online, outside of other third-party retailers, having an independent Shopify store can be the way to go. I’ve personally heard from a number of friends who have set up Shopify shops, with positive results.
The company’s intuitive app and suite of comprehensive services have led to steady growth in its subscriber base. I expect this growth to continue over the long term, as Shopify’s clientele is far different from third-party sellers on Amazon, Shopify’s main competitor. This is a company that’s encouraging the broadening out of the economic system globally and truly aims to democratize the world of e-commerce. That’s a mission I like.
Of note, the market is certainly reflecting increased optimism around Shopify’s prospects, with a strong move off its post-pandemic lows. I think new all-time highs could be in order for Shopify, if the company can continue to grow at the rate it has in recent quarters. Of course, if growth accelerates, this is a stock that could provide truly explosive returns, and that’s why it’s the featured company of this piece.
Hydro One
Hydro One (TSX: H) is an electrical transmission and distribution utility company. Thus, this shouldn’t be a stock that’s on any list of potentially explosive growth stocks. Focusing on distributing, generating, and transmitting electricity from a variety of sources (including renewables), Hydro One is certainly a much more bland type of company, and one many wouldn’t expect to see grow particularly fast.
That said, one look at the company’s stock chart above, and it’s clear that investors have seen strong growth over the past year. Shares of Hydro One stock have more than doubled over this timeframe, with a particularly steep move higher over the past year.
Much of this has to do with expectations of surging electricity demand, driven by AI. If the projections are even close to correct, this is a company that could stand to benefit, particularly in a low interest rate environment. With a dividend yield of 2.7%, the company’s distribution will immediately become more attractive as interest rates continue to come down. And with the Bank of Canada just announcing a jumbo 50 basis point rate cut, this rhetoric should continue to pick up steam.
Like Shopify, Hydro One has seen strong growth over the past year, with a significant revenue surge of nearly 10% and EBIT growing at roughly the same rate. Should the company continue to grow its earnings at this level, I think 5% dividend growth (alongside some multiple expansion and continued capital appreciation) could certainly provide market-beating returns. However, if demand accelerates much faster than expected in the world of utilities, H stock could be one that could soar much higher much faster. We’ll have to see how this plays out, but this is a stock I’m increasingly bullish on right now.
