Growth investing strategies have outperformed value investing over the last several years, on account of slower economic growth and low-interest rates, which have made investors pay a premium for growth sectors such as technology and health care. The trend has accelerated this year, due to the Covid-19 recession and the U.S. Federal Reserve lowering interest rates to near zero levels to lift the economy.
Our indicative theme of Hyper-Growth Stocks – which includes companies with a current market cap of over $2 billion, that have grown revenues at 35% or more each year over the last 3 years – has outperformed the market significantly, rising by about 85% YTD compared to the S&P 500 which is up by about 8% over the same period. See our theme on Hyper-Growth Stocks for the full list of companies and their relative performance over the last few years. Parts of the analysis are summarized below.
Twilio (TWLO) is a cloud communication platform that enables developers to embed communications such as phone, VoIP, and messaging into their web, desktop, and mobile software applications. The company is seeing demand grow through Covid-19, as it offers tools for companies to move from on-premise call centers to cloud-based call centers that allow customer service agents to work remotely. The stock is up by about 235% year-to-date.
Everbridge (EVBG) sells communications services for notifications of emergencies and critical event management (CEM). Covid-19 has hastened the adoption of the company’s solutions, with Enerbridge launching a new “COVID-19 Shield” offering to cater to the needs of government agencies, businesses, and educational institutions through the pandemic. The stock has rallied by about 64% year-to-date.
NovoCure Limited (NVCR) is an oncology company that offers a novel therapy called Tumor Treating Fields, that uses electric fields to treat certain types of brain cancer. The company is also looking to use the therapy to treat other diseases such as lung carcinoma, ovarian cancer, and pancreatic cancer. The stock is up 57% year-to-date.
2U, Inc. (TWOU) is an educational technology company that contracts with non-profit colleges and universities to offer online degree programs. Covid-19 has increased demand for online education, helping the stock rise by about 47% this year.
Zendesk, Inc. (ZEN) is a software company that offers cloud-based CRM (customer relationship management) solutions focused on sales, customer engagement, and support for small, medium, and large businesses. Although the pandemic is likely to impact the company’s revenue growth rates to an extent this fiscal year, the stock is still up by about 47% year-to-date.
Splunk Inc. (SPLK) is a leading Big Data solutions provider that offers software solutions that can gather data from various sources and convert that data into meaningful business insights, enabling users to investigate, monitor, analyze, and act on data regardless of format or source. The stock is up 38% year-to-date.
What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
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