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Bet on Growth Investing Now: Top-Ranked ETFs & Stocks

Sweta Killa

With the world’s two largest superpowers striking the long-awaited phase-one trade deal, the Wall Street, which is hitting record highs lately, is poised to surge even higher. Notably, the S&P 500 has gained nearly 26% so far in 2019 and is on track for its best annual performance in six years (read: Trade Deal Cut in Principle? Sector ETFs to Soar).

The uptrend will also be powered by the Fed’s accommodative interest-rate policy, holiday fervor and a resilient domestic economy. The U.S. economy is on a strong growth path with the unemployment rate hovering around the lowest level since 1969 and third-quarter GDP growth revised upwardly from 1.9% to 2.1%. The housing market is also clearly showing signs of a strong recovery as lower mortgage rates and slower home price growth are acting as catalysts. Easing of Brexit tensions have also added to the strength.

Given the bullishness, nothing seems a better strategy than growth. This is especially true, as growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth stocks are a momentum play and tend to outperform in a trending market (a market characterized by a prolonged uptrend).

However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks.

Given this, we have highlighted five growth ETFs and stocks that have a top Zacks Rank #1 (Strong Buy), suggesting their outperformance. For stocks, we have added double-digit estimated earnings growth for the current fiscal year and a Growth Score of A as parameters.

iShares Russell 1000 Growth ETF IWF

This ETF follows the Russell 1000 Growth Index and holds 529 stocks in its basket. It has AUM of $48.6 billion and charges 19 bps in annual fees (read: A Look Back At S&P 500 Sector ETFs in 2019).

Vanguard Growth ETF VUG

With AUM of $45.9 billion, this fund follows the CRSP US Large Cap Growth Index, holding 280 stocks in its basket. It charges 4 bps in annual fees.

Vanguard Mega Cap Growth ETF MGK

This ETF tracks the CRSP US Mega Cap Growth Index, holding 115 stocks in its basket. It charges 7 bps in annual fees and has AUM of $5 billion.

Vanguard Russell 1000 Growth ETF VONG

This ETF tracks the Russell 1000 Growth Index, charging investors 12 bps in annual fees. It holds a basket of 531 stocks with AUM of $3.3 billion.

SPDR Portfolio S&P 500 Growth ETF SPYG

This fund offers exposure to S&P 500 companies that display the strongest growth characteristics and holds 298 stocks in its basket. It charges 4 bps in annual fees and has amassed $5.3 billion in its asset base (read: Bulls to Drive S&P 500 Higher in 2020: ETFs to Tap).

Copart Inc. CPRT

This company provides online auction and a wide range of remarketing services to process and sell salvage and clean title vehicles. With a market cap of $20.6 billion, it has an estimated earnings growth of 23.1% for the fiscal year (ending Jul 2020).

Fortinet Inc. FTNT

It is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide. The stock has a market cap of $18.1 billion and estimated earnings growth rate of 31% for this year.

Kirkland Lake Gold Ltd. KL

With AUM of $9 billion, this company is engaged in the acquisition, exploration, development, and operation of gold properties. It has an estimated earnings growth rate of 100% for this year (read: Gold to Shine in 2020: ETFs to Consider).

The Boston Beer Company Inc. SAM

This is one of the largest craft brewers in the United States. Boston Beer produces beer, malt beverages, and cider products at company-owned breweries and under contract. With AUM of $4.4 billion, the company has an estimated earnings growth rate of 23.4% for this year.

TopBuild Corp. BLD

This company is an installer and distributor of insulation products, catering to the construction industry primarily in the United States. It has a market cap of $3.6 billion and has an estimated earnings growth rate of 30.1% for this year.

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