These stocks have excellent track records of beating the market.
Growth-oriented investors have experienced a bit of a roller-coaster ride over the past few years. Many companies in the “growth stock” category were struggling just two years ago, but in the bull market we are now experiencing, they’re delivering very different results. However, investors should look beyond the near term and seek out stocks that can perform well over the long run, whether or not they are currently keeping pace with the broader market.
For those who have $1,000 to put to work in the market now, I recommend considering Shopify (SHOP 1.01%) and DexCom (DXCM -1.41%). Here’s why.
1. Shopify
E-commerce giant Shopify hasn’t performed well this year. The company’s shares are down by 15% and are changing hands for just under $64 apiece.
The company’s financial results haven’t been as impressive as the market wanted, and that can be especially problematic for richly valued growth stocks. Shopify’s forward price-to-sales ratio stands at 9.6 — the undervalued range is typically described as having a ratio of 2 or less.
SHOP PS Ratio (Forward) data by YCharts.
Shopify’s share price could remain volatile in the short term, but there are good reasons to hold onto the stock for a long time. The e-commerce industry will be on a growth path for a long time, and management wants to ride that wave for as long as possible. Management’s goal is for Shopify to become a 100-year-old company. Saying it is one thing, accomplishing it will be another. But Shopify’s journey has started reasonably well.
It has become a leader in helping merchants build online storefronts. It allows them to sell and market their products across most online channels, including social media platforms. It has an app store with thousands of customization options to cater to all merchants’ specific and variegated needs. In other words, it aims to provide everything businesses need to be successful, and it is, so far, doing a great job. That’s why Shopify’s revenue has increased rapidly in the past. The company ended 2023 with a more than 10% e-commerce market share by gross merchandise volume.
It also does business in over 175 countries. Even in the U.S., e-commerce represents only 15.9% of total retail sales. That number is lower in many other countries, which highlights the massive growth potential at Shopify’s disposal. Investors can acquire 15 of the company’s shares for $1,000 and have change to spare. That would be a great move.
2. DexCom
The state of diabetes worldwide is concerning. The prevalence of this chronic illness has been growing for decades. Like most chronic conditions, the disease is difficult and inconvenient to manage, and hundreds of billions of dollars are spent on medical costs related to it every year. Innovative technologies that can help diabetes patients achieve better outcomes are important.
DexCom offers just such a technology with its continuous glucose monitoring (CGM) devices that allow diabetics to keep track of their blood sugar levels throughout the day. CGMs are superior to traditional blood glucose meters (BGMs) for several reasons. Let’s name just two.
First, CGMs can automatically make measurements, even when patients are asleep. BGMs must be operated manually and only tell a patient’s blood glucose level at the specific moment of a test. Second, CGMs can automatically send alerts to patients, caregivers, and medical professionals when someone’s blood glucose rises too high or falls too low, something BGMs can’t do. DexCom is one of the two leaders in the CGM market.
Its financial results have been on a strong growth path for a while now. In the first quarter, revenue increased by 24% year over year to $921 million, and its adjusted earnings per share nearly doubled to $0.32.
How much growth potential is there in this market? Consider that DexCom ended 2023 with 2.3 million customers. That number isn’t even close to 1% of the half a billion adults with diabetes worldwide. And while DexCom does not have access to many of these potential customers — considering they live in countries where it has no presence — the company has repeatedly pointed out that even in the U.S., it still has considerable room to grow.
Its addressable market will get even larger as it enters new territories, as it has historically done. DexCom is trading for a little under $113 each as of this writing, so investors can get eight shares for $1,000.