Every investor seeks to build a robust investment portfolio that can beat inflation.
Growth investing is a tried-and-tested method for achieving this objective.
You need to look for attributes that ensure a company can continue to grow both its revenue and net profit.
These characteristics include having a strong franchise, innovative long-term business development strategies and a culture of adaptation and learning.
By owning such businesses, you can compound your wealth over years and grow your investment portfolio to a sizable figure.
Here are three growth stocks that you can consider adding to your portfolio.
Leidos (NYSE: LDOS)
Leidos is a technology-driven company that focuses on research and development to solve scientific and engineering problems for its clients.
The company serves clients in the civil, defence, health, and intelligence sectors.
Leidos has grown its revenue steadily over the last three years, going from US$10.2 billion in 2018 to US$12.3 billion in 2020.
Net profit has increased from US$581 million to US$628 million over the same period.
The growth momentum has carried forward into 2021.
For the first nine months of 2021 (9M2021), Leidos’s revenue increased by 13.3% year on year to US$10.2 billion while its operating profit jumped by 26.2% year on year to US$882 million.
Net profit surged by 34.3% year on year to US$579 million.
Leidos generated US$541 million of free cash flow during the period and also paid out a dividend of US$0.36 for the quarter, up from the US$0.34 paid out in the prior year.
During the quarter, the company snagged important contracts from key government institutions such as the US Army and the National Security Agency (NSA).
For the US Army, Leidos will support its Buckeye programme which provides mission-critical high-resolution colour imagery and digital 3D terrain in a contract worth around US$600 million.
The NSA has contracted the company to develop and modernise its Technical Signals Intelligence mission.
As a whole, Leidos reported a 9% year on year jump in its order backlog to US$34.7 billion, a record high.
Stryker (NYSE: SYK)
Stryker is a leading medical technology company that offers products and services in orthopaedics, medical and surgery, and neurotechnology and spine.
The company is the owner of more than 10,000 patents worldwide and employs 43,000 staff around the globe.
Stryker reported a good set of financial numbers for 9M2021.
Net sales jumped by 23% year on year to US$12.4 billion while operating profit improved by 19.7% year on year to US$1.8 billion.
Net profit climbed by 29.2% year on year to US$1.3 billion.
The company also generated close to US$2 billion worth of free cash flow for 9M2021.
Stryker also has a strong track record of paying increasing dividends.
Dividend per share rose from US$1.38 in 2015 to US$2.30 last year.
The company is on track to raise its 2021 dividend to US$2.52 with the recent declaration of a US$0.63 quarterly dividend.
Management has identified a total addressable market of US$72 billion that’s growing at mid-single-digits annually.
Stryker is embarking on a cost transformation for growth 2.0 initiative to drive operating leverage over the next five years while also improving cash flow through working capital efficiency.
By targeting customers, innovation and globalisation, the company hopes to continue growing steadily in the future.
Dover Corporation (NYSE: DOV)
Dover is a diversified global manufacturer that produces innovative equipment, components, parts and supplies for a wide range of industries.
The company employs around 24,000 staff and is headquartered in Illinois, the US.
Revenue for 9M2021 increased by 20.7% year on year to US$5.9 billion while operating profit jumped by 45.4% year on year to US$998.7 million.
Net profit soared by 51.8% year on year to US$761 million.
9M2021 dividends came up to US$1.49 per share, slightly higher than the prior year’s US$1.475.
Dover has an enviable track record of increasing its dividends for 64 consecutive years.
The company has doubled its order backlog from US$1.4 billion to US$2.8 billion since September 2019.
Dover also generated a free cash flow of US$667 million in 9M2021, higher than the US$563 million churned out a year before.
The company recently concluded its acquisition of Liqal B.V., a provider of LNG and hydrogen fuelling solutions.
Blackmer, one of Dover’s operating units that deals with speciality pumps, also announced a construction and renovation project last week to increase its manufacturing capability.
This project will complete by June 2023 and create around 56,000 square feet of new manufacturing, office, research and development, and training space.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
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