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It’s been a tough year in 2022, to say the least, for those looking to accumulate wealth by growing their portfolio, with growth stock prices hit hard.
growth is king
Across the world, however, a pattern is emerging that revolves around central bank policy and inflation.
In Canada, inflation is falling much more than analysts expected. The UK is experiencing faster-than-expected declines in inflation, and the same could be said for the US.
Whisper quietly, but the signs are promising that we’re moving into a new environment, away from the supposed safe havens of cash ISAs and interest-bearing savings accounts. An environment where growth stocks seek to retake their place on the throne as incumbent king.
Pain is a companion of growth.
While growth stocks come in all shapes and sizes, by mid-2021 I thought many of the more speculative stocks and sectors had become severely overvalued and needed a dramatic cut.
So, as I sat at my desk, I wondered what events could occur that would warrant a halt in the progress of these growth stocks.
It came in the form of supply chain shocks and a war on European soil that sent interest rates snowballing.
Very often, when the consensus view believes that things are bad (or good) and the pain (or elation) is felt in the form of falling (or rising) prices, the opposite is true.
This is because markets move in anticipation of upcoming events, and pain is a necessary component of healing, as any good doctor will tell you.
Greedy when others are afraid, and vice versa.
Towards the end of 2022, as the clouds of pessimism of hindsight hung over the media and global policymakers (shaping the collective consensus), the valuations of some of these growth stocks had hit absurd lows and I thought to myself that it was time to turn around.
Indeed, inflation began to fall earlier and faster than the consensus expected. Consequently, companies like tesla which suffered great falls from its historical highs began to rise from the ashes.
on my shopping list
Don’t get me wrong, I personally won’t be buying Tesla stock for now. But now there are several companies with attractive valuations for my portfolio.
For example, a growth stock I’m looking at right now in a sector I’ve been monitoring for bargains is Eco Animal Health Group.
Like many biotech stocks, its share price has suffered significantly as it is currently unprofitable and trading very close to its 15-year low, down 70% from its 2021 high.
That being said, I like the focus of the business and the growth potential of its products and portfolio. Eco focuses on the prevention and treatment of infectious diseases in cattle, poultry, sheep, pigs, horses and dogs.
This is an area that I think will become increasingly important, with the increase in infectious diseases and the focus on food safety, in a warmer climate.
risk to reward
Investing in growth stocks can be inherently risky at the best of times. But for my portfolio the time has come to buy.
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