In equities, there is no dearth of opportunities. What investors need to avoid is buying overvalued stocks that are in the limelight. Instead, the focus should be on spotting undervalued growth stocks that might be the next one to grab the limelight.
My view is that equities will continue to do well this year. Even with some economic headwinds, the markets are likely to take comfort in the fact that expansionary monetary policies are around the corner. It’s therefore a good time to remain invested and consider fresh exposure to attractive growth stocks.
The focus of this column is on three undervalued growth stocks that are worth holding for the next 24 to 36 months. On a conservative basis, I would expect 100% to 200% from these stocks during the investment horizon.
Let’s discuss the reasons to be positive about these growth stories.
Li Auto (LI)
Li Auto (NASDAQ:LI) is my first pick among undervalued growth stocks to buy. The company has continued to deliver stellar growth numbers. However, LI stock has declined by 35% in the last six months due to negative sentiments in the Chinese markets. The correction is a golden accumulation opportunity for multibagger returns.
After a strong 2023, Li Auto has started this year on a positive note. For January, the company reported deliveries growth of 105.8% on a year-on-year basis to 31,165 vehicles. The company has also set an ambitious guidance for 800,000 annual deliveries. The launch of Li MEGA in March is likely to help in accelerating deliveries growth.
As of January, Li had built a presence in 142 cities with 474 retail stores. Penetration within China will continue to boost growth and support market share growth. It’s worth noting that with $12.13 billion in cash and robust free cash flows, there is ample flexibility to continue investing in aggressive expansion and innovation.
Riot Platforms (RIOT)
An important point to note is that Riot Platforms has strong fundamentals. With a zero-debt balance sheet and a cash buffer (including crypto assets) of $599 million, the company has high financial flexibility. It’s not surprising that Riot has plans for massive hash rate capacity expansion in the next 24 months. If this is associated with an upside in Bitcoin, the company will be delivering robust free cash flows.
To put things into perspective, Riot reported a hash rate capacity of 12.4EH/s as of January. The company plans to increase capacity to 28.8EH/s and 38.1EH/s by the end of 2024 and 2025 respectively. With tripling of capacity in 24 months, there is visibility for strong growth and value creation.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) stock has been in a downtrend and looks attractive at a forward price-earnings ratio of 11. The downside is capped from current levels while the upside potential is significant.
The first point to note is that the company has a total booking backlog of 81.8GW through 2030. For the first nine months of 2023, the bookings intake was 27.8GW. Further, the company has potential booking opportunities of 65.9GW. With a strong order backlog and intake, I expect healthy growth in the coming years.
In terms of expansion, First Solar has completed the construction of its facility in India. The Alabama and Louisiana expansion projects are likely to be completed in 2024 and 2025 respectively. This positions First Solar for higher production in the next few years.
Overall, with a technological edge, First Solar is positioned for healthy growth and abundant global solar investment opportunities.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.