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2 Growth Stocks to Buy Before the Big Bull Rally

Motley Fool - Tue Nov 21, 2023

We may not have reached a bull market yet, but we're heading in the right direction. All three major indexes have climbed this year -- and last week, they completed their first three-week winning streak since early summer.

Why should we feel confident about the possibility of a bull market ahead? Because market phases come and go, and the most difficult times always lead to that time of expansion known as a bull market.

Now, the question is: How should we prepare? If you have some cash available, it's a great idea to add a couple of growth stocks to your portfolio, as they generally flourish in bull environments. You could opt for a well-established name with a long track record of success that offers you a certain amount of security. And you could go for a younger company that may deliver enormous gains as it grows.

Here are two that fit the bill, making them top buys before the big bull rally.

Two investors smile while looking at something on a phone.

Image source: Getty Images.

1. Apple

Apple's (NASDAQ: AAPL) growth story is a long one, but we're far from reaching the final chapter. The company sells a range of top products such as the iPhone, Mac, and Apple Watch that keep fans coming back for the latest versions. These products offer Apple a significant moat, protecting the company from competition, and that's a good reason to be confident about revenue growth over time.

The technology giant also continues to attract new customers -- another good sign for future growth. In the most recent quarter, half of Mac customers and two-thirds of Apple Watch buyers were new to those products.

And both the iPhone and Mac installed base reached record highs in the quarter, which is positive for two reasons. First, actual purchases of those products equal revenue, and second, this client base now is ready to offer Apple recurrent revenue by purchasing services.

Apple offers a variety of services, from digital content to iCloud storage, and this business could be a major revenue driver moving forward. In the quarter, services revenue reached a new all-time high. And the great thing about services is they are very profitable for Apple, with a gross margin of about 70% compared to a gross margin of 36% for products.

Finally, with Apple, you get the ideal combination of growth along with the security of passive income -- the company paid $3.8 billion in dividends to shareholders during the recent quarter. Apple shares have climbed 47% this year, but thanks to these points, they still have plenty of room to run.

2. Chewy

Chewy(NYSE: CHWY) is a newer growth player, offering you the opportunity to get in early at a great price.

First, a bit of background on this e-commerce player: Chewy is an online pet supplies store, selling everything from food to treats and even pet health insurance and virtual vet visits. So you can rely on Chewy for all of your pets' needs.

The company makes it easy to come back, too, offering Autoship -- a platform that automatically reorders and ships your favorite products right to your door. It's no surprise that Autoship orders make up 75% of Chewy's net sales.

The Autoship figures and double-digit growth in active customer spend in the most recent quarter are great points of reference for investors. That's because they show Chewy has a loyal customer base, and this offers us some visibility on future revenue.

It's also important to note Chewy recently made it to a huge milestone. The company reached profitability last year, and earnings this year continue to grow.

On top of this, Chewy is preparing the path for even more growth ahead. It recently launched in Canada -- a market it sees as akin to the U.S. in terms of market share and profitability. And the great thing about this expansion is, thanks to the infrastructure Chewy already built, it didn't require a tremendous initial investment.

Now here's the opportunity for investors: Chewy's share performance hasn't reflected all of these positive points, and the stock trades for 36 times forward earnings estimates. That's reasonable, considering this player could shine in a growth market. And that's why it's a top stock to buy now, before the big bull rally.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Chewy. The Motley Fool has a disclosure policy.

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