How to find the best Canadian growth stocks?

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How to find the best Canadian growth stocks?

How to pick the best Canadian growth stocks?
Image source: © 2021 Kalkine Media®

Highlights

  • Looking at Shopify’s success, many Canadian investors have been taking a closer look at growth investments that can enhance their financial wealth in the long run.
  • Growth stocks belong to business corporations with a revenue growth exceeding the industrial or sectoral standards.
  • Competitive advantage is a distinguishing factor that sets a company in an advantageous position against its competitors, and can help them build customer loyalty and retention.

Looking at Shopify’s success, many Canadian investors have been taking a closer look at growth investments that can enhance their financial wealth in the long run.

Growth stocks belong to business corporations with a revenue growth exceeding the industrial or sectoral standards. Such companies typically utilize their profits to accelerate their business activities and growth operations. 

So, investors thinking of investing in growth stocks may have to forego short-term gains like a dividend income. However, growth stocks are believed to fetch significant capital gains in the future depending upon the company’s success.

Here are some pointers to follow when picking quality growth stocks in Canada.

How to pick the best Canadian growth stocks?

Image source: © 2021 Kalkine Media®

1.    Emerging cultural trends

Growth companies generally benefit from socio-cultural trends. For instance, the rising demand for quality e-commerce experiences became a game-changing factor for Amazon and Shopify.

People often pass cultural trends unintentionally in their daily life. By being attentive to such socio-cultural shifts, one can spot quality growth companies that can have a bright future.

Also read: ETF vs Index Fund: Which is a better investment option? 

2.    Look for a competitive advantage

Competitive advantage is a distinguishing factor that sets a company in an advantageous position against its competitors, and can help them build customer loyalty and retention.

A company may enjoy a competitive edge by offering good quality products and services, or by having a low-cost production technology. Likewise, high switching costs can help a company retain its customer base.

Also, growth companies can gain traction due to the network effect as more people come to know about its offering and buy it.

3.    Niche markets 

Growth investors can also look at niche markets to spot companies with sturdy growth potential. Such companies find niche markets lucrative from a long-term perspective as these have enough room to grow in the future and emerge as key players of that particular market.

Is investment in growth stocks lucrative for you?

Growth stocks can harness significant returns from rapid growth strategies and market-beating revenues in the long haul.

However, investors may have to be patient to reap maximum returns in these cases based on when the company reaches its full potential, and they should ideally not fear away from the price fluctuations. 

If you have long-term investment goals and can bear the volatility risk without dividend expectations, then investment in quality growth stocks can be ideal.

Also read: How can Canadian investors smartly pick stocks?

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