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Best ASX Growth Stocks to Buy in 2023
Australians have been watching the world superpowers eat their own tails since the beginning of the year. China’s real estate market crashed.
Russia’s currency is worthless. And the United States is likely going into another recession brought on by banking troubles a toddler could identify.
Of course, since Australia pegs its currency to the United States Dollar, it does feel the impact of this instability. But what is the best response to it?
Buying a dip in the stock market is like trying to catch a falling knife: Impressive if you succeed, painful if you fail. And that’s on a good day. But when the whole world is in turmoil, it’s more akin to catching the Sword of Damocles. With your teeth.
So, the market is dangerous when it’s plummeting like this. But one of the beautiful things about the stock market is the fact that whether it goes up or down, there is always money to be made. If it is going up, then you buy broadly and reap the rewards. If it’s going down, then you can get some great deals.
That is what we are on the lookout for today. When the market is plummeting, the name of the game is growth stocks. Of course, growth stocks can mean a couple of different things.
Table of Contents:
The Two Flavours of Growth Stocks ↗️
There are two kinds of growth stocks in the world. Knowing which one to buy comes down to understanding them and evaluating which suits your investing style better.
Traditional Growth Stocks
The most common that you will find people investing in are “traditional growth stocks”. These are stocks that are expected to grow in the next ten to fifteen years. When you are looking for this kind of growth stock, you are looking for the next Facebook, Amazon, or Apple.
These are the kinds of growth stocks you want to get into at the end of a recession, however. It would be amazing if you could get in on this kind of stock right now, but as it stands it is almost impossible to tell who is going to survive and who is going to wither away under the pressure of the recession.
Dividend Growth Stocks
On the other side of things are “dividend growth stocks”. These are stocks that, rather than growing at an outlandish rate, instead stay at about the same price for as long as they can. When their share price increases, it is usually just to keep up with inflation. So, why would a company let that happen?
Because the purpose of a dividend stock is not to become enormous. It is to pay the “dividend”—the payment that the company makes to shareholders between one and twelve times per year. The cheaper these stocks are, the better your ratio of investment to the dividend payout. So, if a company costs $100 per share and pays out $.10 per share, you’re getting a better deal if they cost $75 per share.
The disadvantage of dividend stocks is that they might go out of business, just like traditional growth stocks. They will also never reach the highs of traditional growth stocks. The advantage is that as long as they stay in business, you still get paid.
But Which Growth Stocks are the Best? 🔝️
With those definitions out of the way, we can now go over the top 10 growth stocks on the ASX that you need to keep an eye on this year. It has been a stressful year in the world of finance. As we go into the fourth quarter, there is a lot to think about. That’s why we are here to help.
1. Northern Star Resources – Best Overall Growth Stock
Talk to any number of doomsday preppers and they will all give you the same advice about getting ready for the end of the world: Buy gold. The logic is that people have always valued gold, and that they always will.
Gold has been a prised commodity in (almost) every culture in the world, even before it had a use. And that is what makes mining companies like Northern Star Resources take off so fast.
Like many resource extraction companies, Northern Star Resources went through a massive boom in the last seven years. This has been the result of relaxing regulations which have allowed Australian companies to open new mines in countries on the African continent.
While gold is generally seen as a highly reliable growth stock, the fact that it is so reliant on relaxed regulations means that it has the potential to shrink in value should those regulations become harsher.
Obviously, Northern Star Resources is making so much money for so many people that it’s unlikely this will happen. And once a mine is open in another country, it becomes much harder to regulate. But just the fear of regulation impacting a business can be its own liability.
- Gold is highly reliable even in a recession
- A newer company that’s more modern
- More sustainable practices than other gold mining companies
- Subject to regulation
2. GQG Partners – Best Recent IPO
An IPO, or “initial public offering”, is the first time that a stock is publicly traded on the Australian Securities Exchange.
Some companies will go years without seeing an IPO, as trading their stock publicly is a good way to catch the attention of investors who are looking to make fast money shorting stock.
But GQG Partners had their IPO early, and to a resounding success. GQG Partners is an “asset management firm”. That means they make their money through buying stocks on the ASX and turning those purchases into profit through some means or another.
What is really eye-catching about this particular investment firm, however, is their methodology. It is not as if they invest in a highly unique way. They are a standard high-frequency trading firm that uses a combination of trading bots and day traders. The unique thing is what they invest in.
Since their launch in 2021, they have pivoted away from investing in tech stocks, and towards investing in resource extraction. It is their opinion that the tech boom is over, and a resource boom is starting.
As with any asset management firm, you have to keep a close eye on the financial industry in order to be secure in your investment into GQG. The problem doesn’t lie with GQG, but the rest of the industry. There is so much money borrowing and debt going on in the world of finance that it is easy for a company like GQG to find itself holding a number of assets that do not actually exist.
This is what happened in the crash of 2008. Just be on the lookout for whether it’s happening again.
- A skilled asset management company
- Aware of current market trends
- Had a highly successful IPO
- The finance industry has a lot of “fake money” floating around
3. Seven West Media – Best Media Company Growth Stock
If you are involved in media production or publishing in any way, then you will probably be most comfortable getting in on a company whose business you can understand.
The great thing about Seven West Media is that it is not a good growth stock because of some trick or gimmick to its business model.
Seven West Media is on this list because they are a company that has been around since the early 90s that endured the hardship of several recessions and at least one market crash. That means they dealt with the dotcom bubble, the 2002 recession, the 2008 crash, and the 2018 mini-recession, to say nothing of the market turbulence of the 2020 pandemic.
How did they accomplish this? Well, they simply have a solid model of both paper and online news publishing. They can get these products out to a lot of customers at a pretty low cost with an increasingly high demand as time goes on. That’s a growth stock if ever there was one.
It is not the biggest liability, but everyone kind of knows that print news has been on the decline for a few years. This has resulted in many publishing companies getting rid of their newspapers and going completely online in a panic to avoid losses in revenue. However, the companies that stuck it out (such as Seven West Media) have found that there is a “bottom” to that fall in demand.
The result is that Seven West Media is able to make a profit, but first they had to take a risk. And while that kind of behaviour is good for the company, a growth-focused investor might be wary of it.
- A company that knows how to get through troubles
- Operates through a diversity of productions
- Has seen far more growth than loss over three decades
- Willing to take risks, which many investors don’t like.
4. 29Metals – Best Copper Miner
If you know anything about copper, it is probably that it is one of the most conductive materials in the world while also being one of the most common materials in the world.
Conductivity relates to a material’s ability to convey electricity through it in a fast and efficient manner.
As you might imagine, that means that 29Metal’s main product, copper ore, is massively in demand. While the tech industry is seeing a slowdown in growth, the electronics industry is not, meaning that 29Metals is going to have nothing but a boom in its business over the next few years. In fact, Goldman Sachs, the American hedge fund, has called copper “the new oil” for its importance in electric cars.
Electric cars and green energy solutions are really where the big money in the future is going to lie, for reasons we will get into when talking about other companies. But suffice to say, as long as there is electronics in the future, there will be a need for copper, and 29Metals will have business.
Since the biggest boom in copper needs comes from electric vehicles, that means the growth of 29Metals is intrinsically tied to the growth of the electric vehicle industry. And if you know the electric vehicle industry, then you know that their biggest obstacle is shipping.
A consumer car can easily be converted into an electric car, but a cargo freighter cannot be so easily changed over. Advances are being made in that direction, but they have been slow. If that limit cannot be broken, the demand for 29Metals will hit a wall.
- A newer company with a modern approach
- Their focus is on an extremely hot commodity
- Lots of investors are getting in on them
- They have one big hurdle to cross before they can really take off
5. City Chic Collective – Best Retail Growth Stock
If you can rely upon any kind of retail chain to survive the pandemic, it is fashion retail. By 2019, there were tons of different retail stores that were living beyond their means. Many were multi-faceted department stores, but even a few recognizable names in electronics shut down as a simple result of their business being based around a boom that was never going to last forever.
And indeed, some fashion and clothing retail stores had the same thing happen to them. But that is because those particular fashion and clothing retailers were operating on the expectation that the market would always be there for them. City Chic Collective was comparatively humble.
Their net income is only $25 million a year, making them one of the smaller clothing retailers out there. But if you look at their number of stores, employees, and operating costs, you will see that this is way above the curve for how much resources they spend to get that $25 million.
They are a small retailer expected to grow in size, but no one expects them to become the next big thing. Even if they did, they might not be able to handle it. What you can expect out of City Chic Collective is that they grow at the rate of the economy, which is exactly what a growth stock should do.
- Does not overspend
- Takes in an ever-increasing amount of money
- Gets more business as its competition dies off
- Does not grow fast
6. Iluka Resources – Best Multi-Faceted Company
Like many big companies out of Australia, Iluka Resources is a materials and minerals company. But it has a few more elements of it beyond that. For one, it got its start as an operations company. That means while other companies were the ones who would buy mines, they were the group whose services were employed to actually organise the miners and operate the exploitation of those mines.
Eventually they moved towards resource extraction themselves, but they did these things in tandem with each other, doubling the size of their business. And lastly, they also work in the marketing of resource extraction businesses, meaning they are contracted out for lobbying and publicity.
These are three very different industries under one roof. But they have been maintaining themselves in all three for years, and with the pandemic ending it is their time to shine.
Of course, that means their operations can feel spread thin for many shareholders. If you are the kind of investor that likes to know every facet of a company, then Iluka Resources will be hard to keep track of.
They also do not operate in the realm of gold or copper. Instead, they mine industrial sand. Basically, it is the stuff that most glass is made of. Industrial sand is a pretty crowded market, so be wary about up-and-comers getting Iluka Resources out of the way.
- Has a variety of businesses
- Knows its industry well
- Stands out in a crowded industry
- Spread thin in that crowded market
7. Grange Resources – Best Dividend Stock
You have probably noticed a common trend among these companies: Most of them deal in resource extraction. That is because Australia is one of the most resource-rich countries in the world.
And Grange Resources has proven itself to be a highly reliable extractor of iron ore.
What makes Grange really special though has little to do with the operation of its business. This is the company on the ASX with easily the best dividend yield relative to its growth. That means its stock is cheap, its dividend pays a lot, and it can be counted on to keep growing with the economy.
But as we mentioned before, companies that pay strong dividends to their shareholders tend to grow only as much as the economy grows. You shouldn’t expect Grange Resources to pop off or anything.
- Reliable business
- High demand product
- Huge dividend yield
- Not expanding fast
8. Tabcorp Holdings – Best Gambling Company
Australia’s relationship with vice has always been one of its quiet virtues. Gambling, the consumption of illicit substances, and prostitution have more of a place in the country than they do in many other parts of the western world.
And yet, people do not rush to talk about them here like they do for other places.
But that’s just fine for Tabcorp. They are probably the largest gambling companies in the country, producing many of the gaming machines you would use in video poker or slots.
And, surprisingly, they have an unusually high dividend yield. Their stock has been growing year over year as well, so they slightly break the rule of other companies with a dividend growth focus.
Investors have raised concerns, however, about exactly that growth. You see, if a company gives out a big dividend and becomes known for that dividend, then lowering that dividend might lose them more than it saves them. If they keep that dividend going, then they can lose money to an overpriced dividend. In short, Tabcorp has a huge dividend that might become a liability if they run into trouble.
- Consistent market
- One of the biggest names in their industry
- Highly profitable dividend
- One or two bad quarters away from trouble
9. Li-S Energy – Best Lithium Stock
There had to be a lithium stock eventually. Lithium is another key component to the batteries of electric cars, making it part of that incoming green energy boom that we mentioned earlier.
But unlike copper, lithium is also neither found nor exploited nearly as much as the other components of those batteries.
It is anticipated that as electric vehicles replace gasoline powered vehicles, a lithium shortage will form. This demand will create a massive run on the stocks of lithium mining companies like Li-S Energy.
Of course, it can just as easily result in such companies being bought out, regulated to death, or nationalised. None of those things are a deal breaker even if they happen, but they do tend to lower stock prices. So, go into lithium knowing that a bull run might give way to a great escape.
- Focused on an up-and-coming commodity
- Has a deal with Boeing to provide lithium
- Raised a huge amount of capital in its IPO
- Lots of eyes on lithium
10. Clarity Pharmaceuticals – Best Medical Stock
When it came out that COVID-19 would likely stick around in much the same way as the seasonal flu, medical companies across the world rejoiced.
It meant that the government would always buy their vaccines at a high price in order to keep them free once they hit the market.
However, while Clarity Pharmaceuticals is in the business of helping deal with the pandemic, its main focus has been on cancer treatment research. They have their own system for imaging and administering chemotherapy that is leagues above anything else on the market.
Smaller pharmaceutical companies like this, especially ones with advanced cancer research and treatments, tend to get absorbed into the larger medical industrial complex. You will often get your shares refunded to you if a company you’re invested in gets absorbed, but that can be a hassle.
Just be aware that a runaway success in this industry might have been getting bought out as their goal.
- In an industry with constant demand
- Contributes to one of the biggest group undertakings in medical history
- Focuses on a product that has been tremendously successful
- Good chance it gets bought out
There are lots of different industries to invest in. And within those industries, there are a dizzying number of companies. What you need to look for is the industries that are always there. People always need medicine. They always need materials. They always need clothes.
If you can get your finger on the pulse of what people need, then your growth stocks can pay you back a huge amount in a matter of weeks.
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