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Investors Business Daily
Investors Business Daily

10 Growth Stocks Analysts Say You'll Be Glad You Bought

Keeping a list of S&P 500 growth stocks you'd like to own is a good idea. And it might pay off sooner than you think.

Analysts say 10 stocks in the S&P 500 Pure Growth index, including industrial Generac, Signature Bank and Diamondback Energy, stand to gain 25% or more in the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

If that's right, it would mean investors could score a return that's more than two-times greater than the S&P 500's typical one-year return. And that would be a welcome change for pummeled growth-stock investors. The SPDR Portfolio S&P 500 Growth ETF is still down nearly 18% this year — despite a recent rally in July.

Some think the recent positive jobs report makes a case again for growth. "A recession now looks less likely or, at a minimum, farther away. Those wages will be spent, which will keep the economy growing," said Brad McMillan, chief investment officer for Commonwealth Financial Network.

S&P 500: So Bad It's Good?

Some are hoping the S&P 500 is now finding levels that would soon put your watchlist of stocks into action.

History is optimistic for stocks. The S&P 500 dropped more than 16% during the second quarter, says Ryan Detrick, chief market strategist at Carson Group. That's one of the worst quarters ever for the S&P 500.

But he points out a silver lining to such a dismal quarter. A year following a quarterly drop of 15% or greater, the S&P 500 has subsequently rallied in the following year every time. Not once has the S&P 500 fallen in the year after a quarterly drop, he says.

And the gains are usually large. The S&P 500, on average, gained 26.1% in the year following a quarterly drop of 15% or more.

So what kinds of growth stocks in the S&P 500 do analysts like most?

S&P 500 Pure Growth Stocks Analysts Like

There aren't many pure growth stocks left in the S&P 500. Just 56 remain, as falling valuations this year pushed more S&P 500 companies into the value category.

But of those remaining growth plays, analysts like power generator firm Generac the most. Analysts think the stock, which lost a third of its value this year to 245.61 a share, is really a 356.60-a-share stock. And if that's right, it would  imply upside of more than 45%.

And there's profit growth to back it up. Analysts think Generac will make $12.03 a share in 2022. That's up more than 25% from the $9.63 a share the company earned in 2021.

Another favorite growth stock is a surprising financial play. Banks are usually dividend and value stocks. But Signature Bank lands in the S&P 500 Pure Growth category. Shares are off 41% this year to 187.91. Analysts, though, think it should trade for 267.06 in 12 months. If that's right, it would be potential upside of more than 42%.

Analysts think the company's profit will jump more than 43% this year to $21.63 a share. It only yields 1.2%. That's low for a financial.

Value In S&P 50o Growth

Analysts, too, are finding energy growth plays. And that's despite a massive run in the shares already.

Two of the 10 S&P 500 Pure Growth stocks analysts like the most are in the energy sector. That includes Diamondback Energy, which is up more than 13% just this year to 122.10 a share. Analysts, though, think Diamondback's shares will gain another 40% in 12 months to 171 a share.

And talk about profit growth. The energy exploration company is seen earning an adjusted 26.52 a share in 2022. That's up more than 135% from 2021.

Could the S&P 500 growth rally run into a snag? Are analysts even right? These are legitimate questions. But one thing's for sure: even if there is a recession, but if it proves to be mild, the S&P 500 will recover. And fast, if history is any guide. And you won't want to miss out on that.

S&P 500 Growth Stocks Analysts Love

Pure growth stocks expected to rise 25%, or more, over the next 12 months

Company Ticker Stock implied upside to analysts' 12-month price target YTD % stock ch. Sector
Generac Holdings 45.2% -30.2% Industrials
Signature Bank 42.1 -41.9 Financials
Diamondback Energy 40.0 13.2 Energy
Fortinet 38.2 -28.0 Information Technology
Meta Platforms 35.3 -50.3 Communication Services
Devon Energy 34.9 28.5 Energy
SVB Financial 26.0 -39.3 Financials
Qualcomm 25.9 -18.7 Information Technology
Nvidia 25.6 -36.1 Information Technology
Charles River Laboratories 25.5 -40.3 Health Care
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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