Finding top growth stocks to buy now, in either the technology sector or in others, is becoming increasingly difficult. I’d suggest that much of this difficulty comes from the fact that so many of the top revenue growers in the economy now carry valuation multiples that discount plenty of future cash flow generation in the years to come.
That means that those who are buying companies at these elevated valuation levels must have the belief that the companies they’re investing in can continue to grow at an even faster rate. With the rise of artificial intelligence (AI) and other technologies, that could certainly be the case.
That said, I think that only a few companies will come out of this growth rate ahead. And even the best names in the tech sector could get beaten down, if we do see a sharp recession form.
But for those thinking long term, here are two of the top ideas I’m considering right now.
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Shopify
A dominant Canadian tech stock with significant market share in the e-commerce platform sector, Shopify (TSX: SHOP) is one top tech stock I think can provide significant capital appreciation upside over the long term.
I’ve long thought Shopify is a potential investment best made in a Tax-Free Savings Account (TFSA) or other tax-advantaged accounts that allow investors to withdraw future capital gains tax free. That’s because historically, Shopify has been one of the best growth stocks in Canada, absolutely skyrocketing from its IPO more than a decade ago.
That’s a long enough track record for investors to see what’s at play in terms of key growth metrics Shopify has continued to put forward. With solid revenue and earnings beats in recent quarters and plenty of news flow about how e-commerce sales are outstripping traditional in-person shopping, this is a prime option for investors looking to ride these secular growth tailwinds over the long term.
Alphabet
One of the top U.S. growth stocks I’m pounding the table on yet again is Alphabet (NASDAQ: GOOG).
There are too many reasons to cite as to why Alphabet is deserving of a detailed look by investors. For one, the company’s revenue, earnings and cash flows are primarily driven by the company’s core search business. This is about as stable a business as they come, considering Google remains the dominant monopoly in this sector, at least for North American and European consumers (the most profitable global markets, by far).
That’s a solid base the company can build on, and it has allowed Alphabet to generate one of the most impressive cash hoards and balance sheets in the tech sector.
Notably, Alphabet has remained focused on investing these excess cash flows into other key high-growth segments. From Waymo (the company’s autonomous driving division) to its surging cloud business and AI investments in Gemini, investors looking for tangible additional growth catalysts to rely on for a long-term thesis don’t have to look far.
And given the recent investment made by Warren Buffett’s team, Alphabet has been validated by many of the best investors of all time. That’s good enough for me.
