Spring will soon be here, and investors’ thoughts are turning to growth shares. At least, I think they might be, based on what I’m seeing.
The jump in Rolls-Royce shares in response to FY22 results suggests people have the money to get back in as soon as they see signs of hope.
And the FTSE 100 briefly edging over 8,000 makes me think bullishness could be on the way back. Which growth shares might look like bargain buys in the spring sales?
Experian
Experian (LSE: EXPN) shares have had a volatile 12 months, but with little overall movement.
Full-year results won’t be with us until May. But a Q3 trading update was bullish. Organic revenue at constant exchange rates grew 6% in the quarter, compared to the same period last year. Even with unfavourable currency movements, revenue grew 4% at actual rates.
The global economic crunch has had banks critically examining their lending risks. That means more focus on consumer credit checks. And if that environment continues, it can surely only help Experian.
The main risk I see is valuation, with forecasts putting the price-to-earnings (P/E) ratio above 30. But if we see continuing earnings growth, that could soon come down.
Games Workshop
Games Workshop (LSE: GAW) shares are up 25% in 12 months.
The shares are on a forward P/E of 24, with dividends set to yield an estimated 3.3%. That’s possibly fair value, except for one thing.
Games Workshop has a tie-up with Amazon, aimed at developing its Warhammer brand into film and TV productions. It’s an agreement in principle only, at the moment. And so there’s no input from any possible production factored into the company’s guidance yet.
It might not come off, and the year’s share price gains could be lost. But it the deal works out, I could see it as a major cash generator. And that could push the shares up significantly, while improving dividend prospects.
Nasdaq
My third choice is the high-tech US Nasdaq growth index. Or, at least, the stocks in it held by Scottish Mortgage Investment Trust (LSE: SMT).
They include Tesla, down 50% from its 2021 peak. Amazon is also down 50% from its high. And Moderna has slumped 70% since pandemic exuberance faded.
Growth shares fell firmly out of fashion in 2022, and shareholders couldn’t sell them fast enough. I do think US tech stocks in particular had become overheated, and a correction was justified.
I might be wrong, and there could easily be further to fall. But I reckon these stocks are mostly undervalued now. And Scottish Mortgage is one way to spread some money across a whole basket of them. Oh, and its shares are now on a 17.5% discount to net asset value.
Verdict
No stock market investment is truly a no-brainer, and every investor should examine the risks as well as the potential. But of these three, Scottish Mortgage comes closest for me.
