Growth stocks have underperformed their value counterparts since the beginning of the year. This might mean that it is a good time to be looking for opportunities in growth stocks. In light of this, here are three growth stocks that I’m thinking about adding to my portfolio in March.
Adobe
The first stock on my list of growth stocks to buy in March is Adobe (NASDAQ:ADBE). The company provides software on a subscription basis. Its gross margins are huge at over 80% and its net margins are in excess of 30%. The company’s balance sheet is strong, with interest payments on debt accounting for less than 2% of operating income. Lastly, the fact that it is the industry standard makes it extremely difficult for users to switch to different software, meaning the company has a huge economic moat.
Over the last five years, the company has averaged revenue growth of over 20%. This is impressive, but if it shows signs of slowing, I suspect that the stock will fall as a result. I think, however, that Adobe’s competitive advantages will persist, and that this will prove to be a great growth stock for me to buy in March.
Experian
The second growth stock I’m looking at this month is Experian (LSE:EXPN). The company provides credit information to lenders to help them make decisions about who to offer loans to. Like Adobe, the company has a huge competitive advantage. It has a huge database that is almost impossible for a competitor to regulate. Moreover, it provides a service that it is very difficult for its customers to live without.
The risk with Experian comes from the company’s negative working capital model. Experian regularly operates with current liabilities in advance of its current assets. This can limit the company’s financial flexibility. As a result, Experian’s share count has fluctuated in recent years. But the fluctuations have been minor and I think that Experian’s advantages are enduring. This means that Experian is a growth stock that I’d look to buy in March.
Tyler Technologies
The last company on my list of growth stocks to buy in March is Tyler Technologies (NYSE:TYL). This one might be less well-known than Adobe or Experian, but I think it might be a nice under-the-radar investment opportunity for me.
Tyler Technologies provides software platforms to government organisations. This facilitates things like paying water bills or filing court documents. Like Adobe, Tyler Technologies enjoys high gross margins. Unlike Adobe, Tyler Technologies operates in a niche where the competition is almost non-existent and the company has plenty of scope for expansion.
Shares in Tyler Technologies come with a hefty price tag. The stock is not cheap and there is some significant growth already priced in. The lack of competitors, however, means that Tyler Technologies has a relatively clear path to growing its business for the foreseeable future, so I think that the risk of underperformance is somewhat limited.
Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Experian. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
