There are many paths to greater wealth. While some are longer than others, I think it’s only prudent to have an investment horizon long enough to allow you to recover from the odd setback. No investor is perfect. Mistakes will happen along the way. The important thing is to minimize the impact of said investment errors and ensure you learn from each mistake.
The investing game can be as much about blocking punches as landing slam dunks. When it comes to growth stocks you intend to hang onto for several years, it makes sense to go the extra mile when it comes to due diligence, especially if a stock you’re watching has recently gone parabolic.
Paying a hefty price for stock can make sense if the growth narrative keeps improving. However, if you’re buying a stock for its recent momentum, you may wish to revisit the drawing board and ask yourself how you’d take a sudden reversal of trajectory. If you’d buy such a dip, it still makes sense to be a buyer. If not, perhaps it’s better to wait and watch, as painful as it can be to see others continue pulling in the significant gains.
Here are three reasonably-valued growth stocks to buy that may help you on your path to wealth.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the largest company on the planet and is already widely owned by investors holding index funds. Arguably, run-of-the-mill S&P 500 index funds already have plenty of exposure (close to 7%) to the software titan. Why go overweight a stock already comprising a huge portion of the American stock market?
Undoubtedly, Microsoft has played a big part in the early days of AI’s rise, and MSFT stock seems to have already factored in the gen AI jolt. Today, shares are up more than 63% in the past two years and are going for a mildly frothy 37 times trailing price-to-earnings (P/E).
Despite the momentum, historically elevated valuation, and the likelihood you already own shares directly or indirectly through a fund, I think Microsoft is one of those fast-moving growth companies whose narrative stands to get even better.
New AI features, products and innovations from the Microsoft Build 2024 developer conference could help drive MSFT stock further in the second half. Personally, I’m most excited about where the next generation of AI-powered Windows PCs take us.
Five Below (FIVE)
Five Below (NASDAQ:FIVE) is a relatively small discount retailer that has plenty of growth still ahead of it. Undoubtedly, the firm has faced challenges that have caused it to fall short of analyst expectations lately.
Sure, management probably could have done a better job of moving through the harsh industry headwinds. That said, I don’t think investors should count the high-growth retailer out quite yet, not while sales and earnings estimates have been freshly reduced at a time when the firm is aiming to expand its national presence.
When it comes to discount retailers, Five Below is really in a class of its own. Its stores have proven to be a hot spot among children and younger teenagers. With more of a focus on toys, games, candies and seasonal fun items, I view Five Below as part dollar store, part toy store. In fact, I’d argue Five Below brings out the best in both retail categories.
Once discretionary spending bounces back, FIVE stock may gain almost as quickly as it fell. At writing, FIVE stock is down around 39% from its 2021 peak and around 38% from its 52-week high.
Casey’s General Stores (CASY)
Casey’s General Stores (NASDAQ:CASY) is another lesser-known retailer that still has lots of growth left in the tank. Over the past year, CASY stock has rallied more than 45% to hit a new all-time high of over $334 per share. Indeed, shares seem to be in the process of going parabolic. Still, they’re not all that expensive at 26.6 times trailing price-to-earnings (P/E). And if the firm can keep serving up what customers want, I find it hard to give up on the underrated retail gem as it looks to add to its rally.
What’s the secret sauce to Casey’s growth? The company has demonstrated that it’s more than just another convenience store. The firm’s hot food offerings, most notably pizza, have been a hit with crowds looking for tasty eats on the go. Its new BBQ pulled pork pizza offering really looks like a must-try.
Indeed, Casey’s has become a place where one can refuel their body and vehicle while also scratching a few items off the weekly grocery list.
Moving ahead, I’d look for Casey’s to continue its store expansion while continuing to beef up its hot and prepared foods businesses. Also, given the company’s relatively small size ($12.4 billion market cap), it stands out as a tasty takeover target for an industry consolidator.
On the date of publication, Joey Frenette holds shares of Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.