Today, we’ll look at the top 5 stocks listed on the ASX that we think have strong growth potential.
Some of these stocks have already made strong gains and have a lot more upside potential to go.
With record low-interest rates boosting capital markets, growth stocks which are highly leveraged to a bullish market will benefit most.
Some of these stocks are also digital, which means they are highly geared into a post-virus world.
The Best Growth Stocks To Buy Now For 2020
We’ve outlined 5 stocks that we have found to have a good business plan with lots of upside potential and represents some of the best that the ASX has to offer.
Xero Limited (ASX XRO)
Xero offers a cloud-based accounting software platform for small and medium-sized businesses.
Cloud computing is the delivery of on-demand computing services.
This includes servers, storage, databases, networking, software and analytics over the Internet (“the cloud”) to offer innovation, flexibility, and economies of scale.
Cloud computing is the next big thing as it allows mobility, a distinct advantage during the COVID-19 pandemic.
Given the volatility surrounding the coronavirus, the Xero share price along with almost every other stock was sold off during the early phase of COVID-19.
However, it has bounced back and regained nearly all its share price losses since then.
Additionally, Xero delivered strong financial results for the FY 2020 financial year.
The company invested heavily in software development, enabling its software business to achieve consistent revenue growth of 30-40%.
Over the past five years, the company has significantly overperformed the ASX index by about 490%.
Fisher & Paykel Healthcare (ASX FPH)
We first looked at this stock back in May 2019, when the stock was at $14.50.
As of writing, the FPH share price is at $28.66 or 98% higher since we first looked at the stock.
The rally in the stock started in August 2019, well before COVID-19 became an issue. This is likely due to its strong revenue growth since then.
Considering that FPH specialises in the manufacture of medical ventilators, the need for governments to hedge against the current and the next outbreak will likely see continual growth in revenue for this stock.
FPH is a world leader in medical ventilator manufacturing, whose consecutive profits in the last five years and accumulated profit reserves are sufficient to finance a rapid expansion to meet the drastically increased needs of ventilators due to COVID-19.
Opthea (ASX OPT)
Opthea Limited is an emerging healthcare company that specialises in developing novel treatments for chronic eye diseases such as age-related macular degeneration.
Macular degeneration, also known as age-related macular degeneration (AMD), is the leading cause of legal blindness in Australia, responsible for 50% of all cases of blindness.
Opthea’s main focus is on its OPT-302 combination therapy which focuses on targeting wet age-related macular degeneration and diabetic macular edema.
Last year the company unveiled strong study results for OPT-302 which was shown to deliver statistically significant results in patients.
Opthea also anticipates the potential for the therapy to be used for Diabetic Macular Edema (DME), which is an even more lucrative market.
Combined, this gives OPT-302 a market opportunity of almost US$10 billion.
Earlier this year, Opthea was added to the S&P/ASX 300 index during June.
According to the company, Opthea’s inclusion to the index could help diversify the shareholder base as its OPT-302 advances through clinical stages.
Opthea has continued to demonstrate that its treatments are not only effective but address a debilitating condition that affects a significant percentage of the population, through its successful trials.
Over the past 5 years, the company significantly outperformed the ASX by 1,215%.
A2 Milk Company (ASX A2M)
We first looked at this stock back on the 19th March 2018 when the price was around $12.50.
We wrote about it again on the 14th May 2019, when the price was around $15.00.
Since then, the stock has traded up to $18.79 and trading close to all-time highs despite the issues around COVID-19.
Milk is perceived as an essential item. In the first three months of 2020, despite the COVID-19 outbreak, A2M reported better than expected revenues because of panic buying by consumers fearing extended lockdowns.
Further, in an April press release, the company posted revenue expectations of NZ$1.7-NZ$1.75 billion for FY20, implying growth of 30%-34% YoY – an admirable performance given the current economic scenario.
In the first half of FY20 (1H20), the company delivered double-digit revenue growth (year-on-year) in all three product segments of liquid milk, infant nutrition businesses, and other nutrition.
Geographically, A2M enjoyed double-digit revenue growth in ANZ and China/other Asia and triple-digit growth in the USA in the same period.
In December 2019, Bloomberg labelled the company as globally the best-performing stock of the decade with a 16150% return.
With effect from June 22, 2020, A2M will be included in the S&P/ASX50 index.
Over the past 5 years, the company has significantly outperformed the ASX200 index by 2620%.
Pushpay (NZE PPH)
PushPay (NZE PPH) is an Auckland headquartered company that provides integrated ChMS (Church Management Services) and donor management services to the faith and not-for-profit sectors worldwide.
The company’s biggest market is in North America where it has 98% of its clients.
The spread of COVID-19 across the world has played right into the hands of PushPay.
As customer-facing and religious organizations put a hold on in-person gatherings, they are utilizing the company’s digital services to engage with their communities digitally and provide a platform for digital giving.
At the end of last year, the company acquired Church Community Builder, a SaaS platform for the faith sector, to offer a more vertically integrated suite of services.
The company has since declared a 42% jump in customers and a 32% jump in overall revenue, both on a YoY basis.
After a brief period of underperformance for a year, after its IPO, the company has significantly outperformed the ASX200 since mid-2017.
How Do We Find Growth Stocks To Buy?
Growth stocks are generally driven almost entirely by qualitative factors such as first mover advantage, quality and quantity of assets, permits and technology.
Quantitative factors such as profit, revenue and so forth generally take a back seat.
Even though it is imperative that their financials are sound, when it comes to growth stocks, we are buying the story and perceived future value.
However, the very nature of valuing companies through qualitative factors means that there is a lot of room for error, opinion and subjectivity.
This means that high growth stocks tend to be small-cap, high risk and highly speculative.
The hardest part when it comes to finding growth stocks is the ability to process the information and factors at hand to make a good judgement call.
Our Research team specialises in this and has combed the ASX for some of the best growth stocks on the Australian market.
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This is general advice only. MF & Co Asset Management has not considered your personal financial needs, objectives or current situation. This information is not an offer, solicitation, or a recommendation for any financial product unless expressly stated. You should seek professional investment advice before making any investment decision.