One of the big advantages of growth investing is the potential for market-beating returns. Choose wisely and you can be rewarded with outsized gains when compared to the overall market. However, investors should also keep in mind that growth stocks can underperform the market in a big way when stock prices are on the decline. As long as you are willing to accept the potential volatility in exchange for higher potential upside, growth investing can be extremely lucrative.
While the market has been sending mixed signals about certain growth stocks lately, that shouldn’t stop you from keeping an eye out for lesser-known companies that are showing strength. After all, the next big winner is always one trade away. 3 particular growth stocks look like they might have market-beating potential given their business models and recent price action. Let’s take a deeper look below.
Mohawk Group Holdings (NASDAQ:MWK)
This is a consumer products company that is very intriguing since it uses cutting-edge technology like machine learning and data analytics to design, develop, market, and sell its products. Investors should be interested in the fact that Mohawk is combining artificial intelligence and ecommerce into one distinctive business model. Mohawk’s proprietary AI Mohawk eCommerce Engine is used to identify new market opportunities, automate marketing variables, and analyze and optimize the company’s consumer product brands. Mohawk has already had several proven product launch successes and the company has generated a 50% Net Revenue CAGR since 2017.
We know that global ecommerce sales are growing at a rapid pace, and this company’s business model could be one to watch. One of the big advantages here is that Mohawk can leverage its tech to significantly shorten the go-to-market timing for products versus its competitors. It’s also using its proprietary technology to make savvy acquisitions, including the recent purchase of Healing Solutions LLC at a bargain-priced 3.8 times operating income. While Mohawk Group is not profitable yet, the stock is up over 150% year-to-date and could be a huge winner over the long run.
Silvergate Capital Corporation (NYSE:SI)
Next up is one of the first banks to specialize in providing financial infrastructure solutions and services to participants in the digital currency industry. If you are a big believer in cryptocurrencies and the future impact that they could have on the financial system, Silvergate Capital Corporation is a great growth stock to consider. The company’s Silvergate Exchange Network (SEN) enables the 24/7 real-time transfer of USD between digital currency exchange customers and institutional investors, which is an invaluable service since cryptocurrency is still in its infancy. The SEN network handled $135.7 billion of U.S. dollar transactions in 2020 compared to $32.7 billion in 2019, which confirms that significant growth is taking place for the company.
We’ve already seen several high-profile companies add bitcoin to their balance sheets, and it’s only a matter of time before more institutional investors start adding exposure to digital currencies. Just this week, Goldman Sachs announced that it has restarted its cryptocurrency trading desk, another interesting move that perhaps signals that these digital currencies are closing in on widespread adoption. This all bodes well for a company like Silvergate Capital Corporation, which has onboarded 76 crypto exchanges and 600 institutional investors onto its network thus far. Keep an eye on this stock if the cryptocurrency rally continues in 2021.
Last on our list is DermTech, a company that is rethinking the way that skin cancer is detected. With more than 20% of Americans developing skin cancer by the age of 70, a company that has a chance to revolutionize the way that doctors detect this ailment certainly has market-beating potential. DermTech develops has developed innovative products that facilitate the early detection of skin cancers with a melanoma detection sticker.
The standard way that doctors diagnose skin cancer is by surgical biopsy, which is prone to human error and requires physical cutting. Dermtech’s product painlessly lifts skin cells without the need for a scalpel and allows doctors to detect the disease earlier and more accurately. The stock is up 111% year-to-date and there’s plenty of reason to be optimistic about this company going forward. Back in 2020, Dermtech received great news as Medicare decided to cover the tests that the company has created. Dermtech also already has agreements with Blue Cross and Blue Shield of Texas and Blue Shield of California. It could just be a matter of time before DermTech’s testing is the gold-standard for skin cancer detection, which is why it’s a growth stock that should be on your radar going forward.
Before you consider DermTech, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and DermTech wasn't on the list.
While DermTech currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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