The idea of owning shares is that I can pay for something today that will hopefully turn out to be worth more in future. That explains why I am always interested in exciting growth stocks that I can add to my portfolio.
Here are two such shares I think could help improve my wealth for years to come.
Alphabet
Alphabet (NASDAQ: GOOG) is best known as the parent of online search and advertising giant Google. But it also owns a range of other businesses, from YouTube to Waymo. I think the core business could continue to see strong growth in future. On top of that, I expect revenues to grow due to the assortment of other services beyond Google.
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Google’s dominant position could become more and more lucrative as digital tools play an ever greater role in the lives of people across the globe. It has a proven business model underpinning Alphabet’s incredible financial performance. Last year, for example, Alphabet recorded earnings of $76bn. For a company that is less than three decades old, I regard that level of profitability as outstanding.
Despite its strong competitive advantage, pricing power and large user base, over the last year the Alphabet share price has slumped 26%. Growth stocks generally have fallen, but I think in the case of Alphabet this has been overdone. It now trades on a price-to-earnings ratio below 20.
I do see risks here. For example, tightening client advertising budgets could hurt both sales and profits at Alphabet. But I see the company as one that is likely to do well over the long term. If I had spare money to invest today, this is one of the growth stocks I would happily add to my portfolio.
JD Sports Fashion
Over the past decade, the performance of retailer JD Sports Fashion (LSE: JD) has been very strong. Revenues and profits last year both hit an all-time high.
Can this impressive performance continue in the next decade and beyond? I think it may. The market for leisurewear and sports accessories is likely to keep growing, in my view. JD has a proven formula that it can apply in key markets across the world, including the US. I see that as a massive opportunity.
The company has been consistently profitable and seems to benefit from strong brand loyalty among its large customer base. Despite those strengths, the JD Sports share price has tumbled. In the past year it has fallen 55%. That means that the company now has a market capitalisation of under £5bn.
I see that as excellent value and would happily buy more shares in the business if I had spare cash to invest right now. There are risks: new management might struggle to create the positive momentum of the former long-term leader. But with a proven formula in an area where I expect to see robust demand, I think JD’s international growth platform might help propel it to new heights in future.
