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Value stocks were angry last year as global stock markets struggled. However, after selling off in the more speculative areas of the market, many growth stocks look cheap to me right now. I’m considering adding some to my long-term investment portfolio as a result.
I have browsed it FTSE 100 and FTSE 250 to identify shares with strong potential, and settled on two that I can buy good for me in March.
Let’s explore each one.
Scottish Mortgage Investment Trust
Scottish Mortgage Investment Trust (LSE:SMT) is the cornerstone of my growth stock portfolio. Unfortunately, this didn’t work out so well as my position was already in the red.
That said, I’m a long-term investor, so I’m not too preoccupied with short-term volatility. I think the current Scottish Mortgage share price could be a golden opportunity to invest more in this growth focused fund.
The FTSE 100 investment trust has a truly global portfolio, with more than 54% of its equity holdings located in North America, 24.5% in Europe, and 15.3% in Asia. It has shares in 52 private companies, representing more than 28% of the total portfolio.
Despite the slump in share prices, Scottish Mortgage is still outperforming FTSE All World Indexwhich is believed to be used as a benchmark.
There are significant challenges facing the fund. The US recession is perhaps the most obvious. Interest rate risk is another. If the Federal Reserve continues to pursue monetary tightening, bonds and cash savings will look more attractive, potentially driving investors away from riskier assets.
However, I still believe in the fund’s top holdings in the long term. After all, Scottish Mortgage has some of the most innovative companies in the market.
| Deposit | % of the Scottish Mortgage portfolio |
|---|---|
| Modern | 9.4% |
| ASML | 7.3% |
| Tesla | 4.1% |
| Free market | 3.9% |
| Illumina | 3.6% |
Today’s share price of 718.6p represents a 15.9% discount relative to the net asset value of the fund’s investments. It looks like a buying opportunity to me.
Kainos Group
Turning to the FTSE 250, Kainos Group (LSE:KNOS) is another growth stock on my watch list. This Belfast-based business provides information technology services, software and consulting solutions to a wide range of companies and organisations.
The share price of the Kainos Group share price in 2023 to date, decreased by 11%. But I think this might be a good time for me to take a position in the company.
Interim results for the 2022 half-year show the strength of the company’s partnership with US software vendors Working day. Revenue for this division is particularly encouraging.
Elsewhere, Kainos should benefit from strong demand for artificial intelligence and SaaS solutions.
Inflation is a major challenge facing businesses. The company’s operating expenses rose 35% to £56.8m in H1 2022, which was higher than the company’s revenue growth.
Another consideration is cybersecurity. A successful cyber attack could cause significant reputational damage as Kainos operates in sensitive areas, such as the digital infrastructure of the NHS.
However, the company is debt free and its growth prospects look good. If I had the money, I would buy Kainos stock today.
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