Key points
- Some FTSE 250 growth stocks have more potential than others
- These companies have unique competitive advantages
- They could report substantial growth over the next decade
Recently, I have been looking for FTSE 250 growth stocks to add to my portfolio. I am looking for companies with fantastic growth potential over the next decade and a robust competitive advantage to help them achieve their aims.
Here are two companies I would buy, considering their growth targets for the next couple of years.
FTSE 250 growth stocks
The first on my list is Trustpilot (LSE: TRST). As the world becomes more digital, service providers need to show their customers they are trustworthy. Customers also want to know the enterprise they are buying from is not a scam.
Trustpilot fulfils this niche in the market. The company has built a brand that is well trusted by consumers and businesses alike. This is a tremendous competitive advantage. The group has developed this trusting relationship over the years.
The longer it is able to maintain the relation with users, the more significant the advantage will become. Indeed, I think it would take years and a vast amount of capital for a competitor to achieve the same stakeholder trust and awareness level.
Of course, this does not guarantee that the business will never face any competition. I think there will always be challenges to its dominance. The company also needs to ensure that it maintains the quality of reviews. If it lets its guard down, the trust between stakeholders will quickly vanish.
Despite these risks and challenges, I would be happy to buy the stock for my portfolio of FTSE 250 growth shares today, considering its substantial competitive advantages.
Defensive market
In my opinion, the food industry is one of the most defensive. Humans will always need to eat and drink, so it seems likely there will always be a market for these products.
That is why I think Premier Foods (LSE: PFD) also deserves a position in my long-term growth portfolio. The owner of the Mr Kipling brand, among others, is coming out of a decade-long slump, which began during the financial crisis.
However, over the past couple of years, the company has made substantial progress reducing debt, cutting pension liabilities, and freeing up cash to invest in marketing.
Now it has removed these chains from around its neck, I think the group is primed for growth over the next decade. It is planning to hike marketing and investment spending further and increase shareholder returns.
While the food industry is defensive, it is also incredibly competitive. And competition is probably the biggest challenge the group will have to deal with over the next few years.
Despite this headwind, considering its long-term potential, I am excited about the outlook for the FTSE 250 company.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
