Growth stocks have endured a tough start to the year. There was the tech sell-off, which hit growth stocks hard, in January and February. And more recently, amid rising inflation and interest rates I, like many other investors, have looked toward dividend stocks that provide near-term returns rather than long-game growth stocks. Higher interest rates also mean increase the cost of growth as borrowing costs go up.
However, that doesn’t mean I’m ignoring growth stocks. In fact, I’ve been digging deeper to find some with great long-term prospects for my portfolio.
Oriental Culture Holdings
I’ve had Oriental Culture (NASDAQ: OCG) in my watchlist for a while. As I write, the stock is trading below its IPO price, but this belies a strong showing in 2021. In its full-year results, released on Monday, it said that operating revenues increased 115.6% to $37.6m in the 2021 fiscal year. Gross profit rose to $35.2m in 2021, up from $14.8 million in 2020, representing 137.7% growth.
The company is a leading online service provider for the trade of artworks and collectibles. It experienced its impressive growth on the back of a resurgent Chinese market. In 2021, more revenue was generated from fine art sales in China than in the US, according to Artron, a Chinese art sector group. Revenue from fine art sales in China grew 43% to $5.9bn in 2021, with 63,400 pieces sold. The company is also moving into the non-fungible token space, which could prove lucrative in the future.
While I feel this is a great long-term pick for my portfolio, it’s worth considering the impact of continued Covid-19 lockdowns in China on the country’s art market.
Netflix
Netflix (NASDAQ: NFLX) tanked in April after the subscription service released disappointing Q1 figures. The report showed that subscribers are leaving Netflix’s streaming services in record levels and investors subsequently rushed for the exits. The stock fell 40% in a single day and is currently trading around $200 a share. That’s a massive fall from the $700 it was trading at in November.
Despite this, the company remains profitable. Net income during the quarter ended March 31 fell 6.4% to $1.6bn, down from $1.7bn the year before. But interestingly, Netflix said it would have seen 500,000 net additions during the most recent quarter if it wasn’t for the impact of shutting down its services to Russians. The winding-down of all Russian paid memberships resulted in a loss of 700,000 subscribers.
Yalla Group
My final pick is Yalla Group (NYSE: YALA). The stock gained after its IPO in 2020 and went from strength to strength, reaching $39 a share amid the unique market conditions. But it started falling in early 2021. Currently, the social networking and gaming provider is trading at a little over $4 a share, so there’s plenty of headroom here.
The firm posted net income of $82.6m in 2021 compared with net income of $3.2m in 2020. That’s impressive, but growth has slowed. In fact, revenue actually declined in the final quarter of 2021. For me, Yalla will need to show evidence that it can get growth back on track. But it has an ambitious plan and enough cash to push forward. Yalla’s price-to-earnings ratio is around 10, which for a tech stock, makes it look pretty cheap to me.