There has been chatter in financial circles about whether this is a good time to pick growth stocks to buy and hold, as the concentration of market gains in a few large technology companies over the past year concerns investors. Just seven mega-cap stocks accounted for 69% of the 2023 gains of the S&P 500 index. While growth becoming focused on so few equities may signal weaker breadth across the overall market, periods of this nature have historically seen outperformance from growth stocks relative to their value counterparts. This may be an opportune time to pick some growth stocks to buy and hold.
With major indices recently reaching new highs, the growth stocks present numerous options for building a future fortune. However, signs of overheating and the potential for a market adjustment must also be considered, as market corrections may disproportionately impact more speculative growth positions. Therefore, picking growth stocks to buy and hold requires careful analysis, ensuring the prospects are in for sustainable long-term success.
The aim would be to evaluate companies demonstrating strong competitive advantages and positioning for continued expansion but also available at reasonable valuations relative to their potential. A few growth stocks meet these criteria and may reward patient shareholders over many years as their operations develop. Overall, great companies have generally delivered outstanding returns for long-term-focused investors, allowing them to build future fortunes.
ExxonMobil (XOM)
ExxonMobil (NYSE:XOM) is one of the growth stocks to buy and hold for the long term. While companies focused primarily on fossil fuels may not appear well-positioned, it is early to underestimate the demand for crude oil in the coming decades. Indeed, the U.S. Energy Information Administration (EIA) warned of potential near-term supply constraints and forecasts West Texas Intermediate (WTI) crude to average over $80 per barrel for the remainder of 2024. Natural gas likewise represents the second largest source of electricity generation internationally, a vital resource as the adoption of electric vehicles expands.
At half the price-to-earnings (P/E) ratio of the S&P 500, ExxonMobil provides shareholders with a meaningful forward dividend yield of 3.6%. Being well positioned as the world’s largest publicly traded international oil and gas company, analysts’ consensus indicates continued upside, with an average 12-month price target of $115.42 per share.
APPLE (AAPL)
One of the Magnificent Seven among the most Warren Buffett-preferred brands, Apple (NASDAQ:AAPL) cannot be missed from a list of growth stocks to buy and hold. Although its stock price exploded last year by over 50%, this company’s P/E ratio is still very compatible with the S&P 500, at 28.4, meaning it doesn’t push the market too far and doesn’t face a sharp turnaround risk.
A slow recovery in China has dragged down iPhone sales. However, the company’s service expansion beyond headsets to services may assist it in living up to its growth stock to buy and hold reputation. One of the services includes developing data-intensive web services in the rapidly growing cloud computing segment.
Tyler Technologies (TYL)
Tyler Technologies (NYSE:TYL) is a specific field company offering operational software solutions to government bodies. Its market positioning may create an interesting investment opportunity inherently unique in itself. TYL is the last pick of our growth stocks to buy and hold.
Local governments in the U.S. are experiencing pressure to update their ERP infrastructure and connected technologies. This represents a huge market for Tyler Technologies that has remained almost untapped by them for two decades and lacks strong competition.
Management predicts strong sales growth, estimating year-over-year (YOY) growth to increase 7.9% in the next three years. Analysts view the stocks positively, estimating an average price target of $483.88, with growth estimates for this quarter alone at 17%.
On the date of publication, Stavros Tousios did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
