Inflation is one of the top worries for investors at the moment. Indeed, in the UK, it has recently hit 6.2% and in the US, it reached 7.9% in February. This has been made even worse recently, due to the global oil price soaring to unsustainably high levels. Such high inflation rates have already resulted in interest rate hikes in both the UK and the US. This can result in investors switching from equities to bonds. The effects of high interest rates on growth stocks are also very profound, as it becomes more expensive for these companies to borrow and fuel growth.
But as an investor I take a long-term outlook, and these are two stocks I feel are no-brainer buys right now.
A US fintech stock
SoFi Technologies (NASDAQ: SOFI) went public via a SPAC at the end of 2020 and had an incredible start to life as a public company, reaching around $25 in January 2021. However, the past few months have been far less pretty for the fintech, and it’s currently priced at under $10. For a company with such excellent potential, this seems too cheap.
For example, SoFi is attracting new customers at extraordinary rates. Indeed, in the full year 2021 trading update, it had around 3.5m members, compared to just 1.8m members the year before. Full-year revenues were also able to rise 67% year-on-year to $285m. This demonstrates the excellent growth achieved by SoFi, and I feel this is only the start. Â
I was also encouraged by the fact it recently acquired a bank charter, meaning that it will be able to directly lend to customers. This should help offset some of the inflationary pressures, as it will be able to lend at higher interest rates. Accordingly, this should boost future profitability.
Unfortunately, SoFi trades at a fairly high price-to-sales ratio of around 8, and it remains unprofitable. Yet while these are risks, SoFi’s incredible growth is showing no signs of any slow-down, and I continue to believe this growth stock is a long-term buy.
A growth stock with over 100% revenue growth
Sea Limited (NYSE: SE) is another growth stock that piques my interest. Indeed, in the company’s full-year trading update, it reported full-year revenues of $10bn, a 127% year-on-year increase. This was partly due to its strong diversification, which includes the modern e-commerce segment, called Shopee, and its renowned digital entertainment sector, Garena. After recent dips, the company also trades at a price-to-sales ratio of under 7, very cheap for a stock that is growing at such an incredible rate.
Even so, there are slight signs that growth may be slowing. For example, as the pandemic starts to subside, there has been a recent moderation its engagement in the company’s digital entertainment sector. The e-commerce segment also saw revenue growth slow to 90% which, although still incredibly high, was lower than previous quarters.
Losses are also continuing, and in 2021, it reported an adjusted EBITDA loss of $593m. But this is due to the heavy investment into Shopee, which I hope will pay off in the future. Therefore, this is another growth stock I’ll continue to add to my portfolio, as its potential is far too tempting.