Growth Stocks Story Not Over, but Patience Required

The 2022 struggles of growth stocks are rightfully giving investors pause, but market participants shouldn’t be considering ignoring growth fare for extended periods of time.

In fact, some market observers argue that there’s still potency in growth equities. It’s simply a matter of investors being patient with the currently downtrodden asset class. That patience could be easier to exercise with exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) rather than individual stocks.

Past performance isn’t a guarantee of future returns, but the track records of QQQ and QQQM components are hard to ignore. and the case for repeats in the future is supported by the innovative reputations of many of these firms.

“We believe there is always a place for growth stocks in a portfolio, and their long-term track record is a strong endorsement. Over the past 10 years, the Russell 1000 Growth Index has provided an average annual return 2% above the broader Russell 1000,” according to BlackRock research.

Although plenty of QQQ and QQQM components notched some third-quarter upside or less bad performances than those that were seen in the first half of the year, there are still plenty of compelling prices to be had in this space.

“Many growth stocks have regained more than 20% from their June bottoms, but we still see attractive entry points into businesses with exciting long-term prospects. The key is to be selective and risk aware, particularly in this highly uncertain macro environment. Our experience has shown us that entry points like some we’re seeing today can reward patient investors,” added BlackRock.

BlackRock is constructive on communication services, e-commerce, and software stocks among growth equities. Communication services — a sector that’s currently home to attractive valuations — is the third-largest sector allocation in QQQ and QQQM, accounting for 15.79% of those ETFs’ rosters.

Further supporting the long-term cases for QQQ and QQQM is that these ETFs are large-cap funds, and that’s relevant because it’s the large-cap space in which many of the higher-quality growth names reside.

“We see the large-cap universe teeming with high-quality companies, and the mid-cap space boasting a combination of niche market leaders and up-and-comers that have unique products and solutions we believe can enable them to take market share and grow,” concluded BlackRock.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.