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 2021
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.
Appen (ASX APX)
Appen (ASX APX) is a global leader in developing high-quality, human-annotated datasets for machine learning and artificial intelligence.
With over 20 years’ experience, expertise in more than 180 languages, and access to a crowd of over 1 million people, Appen partners with leading technology companies and government agencies to enhance their machine-learning-based products.
Appen has plunged more than 16% in a week, due to a downgraded FY20 EBITDA guidance released on 10 December 2020.
Slowing digital ad spending and an appreciation in the AUD/USD exchange rate during Q4 contributed to lower-than-expected revenue growth from its major clients, and hence the downgrade.
The concentration of revenue from major clients and exchange rate risk were not a surprise to us as they were covered comprehensively in our 2019 report.
However, we are still confident in the long-term prospect of artificial intelligence and AI adoption as the technology landscape remains relatively intact under COVID-19.
Bigtincan Holdings (ASX BTH)
Bigtincan is a leader and innovator in the Software as a Service (SaaS) provider of sales enablement software with core operations in Sydney and sales headquarters in Boston.
The company’s software organises and delivers automation and productivity tools for employees, in other words, software that provides sales team with resources to close more deals.
This is a service that will have tremendous growth as the workforce shifts towards digital sales coaching, as opposed to physical classrooms, even after the COVID pandemic.
With the advent of working from home and the growth in digital and technology solutions, the shift from classroom to digital sales coaching will continue to grow now and into the future.
Some estimates forecast that up to 55% of sales training will be digital by 2021.
The global SaaS market is estimated to be US$68.2 billion in 2020, with a Compound Annual Growth Rate (CAGR) of 18.2% over the next 7 years.
In addition, Bigtincan has also leveraged its products towards the mobile sector, another industry with strong growth.
Bigtincan is well placed to leverage multiple high growth sectors and is a stock that we think has strong potential.
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%.
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%.
Ansell (ASX ANN)
Ansell specialises in manufacturing and distributing personal protective equipment (PPE).
we first recommended Ansell back in April during the COVID crash and we take a deeper dive into the stock today.
If the world is to learn from its COVID mistakes, PPE will become a product that will be in high demand for the foreseeable future.
In addition, a company such as Ansell is a strong pandemic hedge as it is virtually guaranteed COVID will not be the last one that we have.
Having stocks in your portfolio which can be uncorrelated during times of turmoil is a good way to increase return whilst reducing volatility.
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.
Make Your Money Work Harder For You
Picking the best stocks to buy now, timing the entry and having an edge in the market is not easy.
Download our special report below for another 5 best shares to buy now which comes with a special strategy that we use for our clients to make your money work harder for you.
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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.