close
close

2 Most Important Growth Stocks to Consider Buying in June

Silhouette of a bull standing atop a landscape with the sun setting behind him

Image source: Getty Images

Investing in growth stocks requires patience. But for those who are willing to wait, they can be a great way to build wealth over time.

The key is to find companies that can grow their profits consistently and over a long period of time. And there are a few that I think seem like good candidates right now.

Growth prospects

Acquiring other businesses can be a great source of growth. This can be risky if done poorly, but it can be a great way to increase revenue for a competent management team.

A good example is Berkshire Hathaway. Warren Buffett’s acquisition skills transformed a struggling textile mill into a hugely successful conglomerate with a diverse set of operations.

As Buffett points out, Berkshire’s size now makes rapid growth difficult. Acquisition opportunities large enough to make a difference in an $885 billion company are limited.

Berkshire is not the only company with the ability to acquire well, however. There are other companies with a similar structure that do not face the same daunting obstacles.

Bunzl

FTSE100 action Bunzl (LSE:BNZL) is an excellent example of this type of transaction. The company brings together around 150 subsidiaries which distribute hygiene, packaging and safety products.

A combination of acquisitions and organic growth has helped earnings per share increase on average about 10% per year over the past decade. And there may well be more to come.

Management has indicated that the acquisition pipeline appears strong. And with a market capitalization of £10 billion, it will be a long time before the company’s size becomes an obstacle to its growth.

The stock trades at a price-to-earnings (P/E) ratio of 19, which is higher than the FTSE 100 average of 13. This is a risk for investors to consider, but the company has exceptionally good attributes.

Bunzl combines the speed and reliability of a global company with the agility and responsiveness of a local company. This is a powerful combination that I hope will deliver strong growth for a long time.

Dover

Dover Company (NYSE: DOV) is another interesting growth stock: If I had bought it five years ago, I would have doubled my money by now. I think this is worth paying attention to.

The company is a collection of approximately 50 companies focused on industrial equipment, components and support services. Its subsidiaries dominate their respective industries, making them difficult to disrupt.

Dover is more than twice the size of Bunzl, increasing the risk that the company’s growth will slow. And earnings per share have only grown about 6% per year over the past 10 years.

It’s worth noting, however, that the stock trades at a lower price-to-earnings ratio of 17. And the company’s status as a Dividend Aristocrat is a testament to its sustainability as a growing company.

Create wealth

At current prices, neither Bunzl nor Dover appears to be a bargain. But the point of growth stocks is not what the company earns now, but what it will earn in the future.

In my opinion, Bunzl and Dover are incredibly robust companies, with the potential to grow their profits significantly over time. And when they do, I think today’s prices will appear to be excellent value.