Here, I’m going to highlight three top stocks in Terry’s Smith Fundsmith Equity fund I’d buy today. All of these companies are leaders in their industries and appear to have considerable long-term growth potential.

Microsoft

Let’s start with Microsoft (NASDAQ: MSFT), which is one of Fundsmith’s biggest holdings. It’s one of the largest technology companies in the world.

To my mind, MSFT has all the right ingredients to be a ‘core’ long-term holding. For starters, it has attractive long-term growth prospects. In the years ahead, it should benefit from the growth of the number of industries, including the cloud computing, remote work, and gaming industries. 

Yet at the same time, it’s a relatively ‘defensive’ company. People aren’t going to suddenly stop using Microsoft products like Office and Azure if there’s an economic slowdown. Meanwhile, the group has a strong balance sheet and generates an enormous amount of cash. 

Of course, MSFT is not risk-free. If we see further weakness across the tech sector, MSFT could underperform. With the stock now trading at 28 times next year’s earnings however, I think it’s a good time to be buying for my portfolio.

Estée Lauder

Next up is Estée Lauder (NYSE: EL). It’s one of the world’s largest skincare and make-up companies.

One reason I like this Fundsmith stock is that its brands provide a strong competitive advantage. When it comes to beauty products, people tend to buy the same brands over and over again.

Another reason I see appeal here is that the company looks set for growth both in the short term and the long term. In the short term, it could benefit as the world continues to reopen and people socialise more. Meanwhile, in the long run, the company looks set to benefit from the ‘premiumisation’ trend – where consumers are happy to pay more for premium products.

It’s worth pointing out that EL does have a relatively high valuation (the forward-looking P/E ratio is about 34). If future growth is disappointing, the stock could fall.

However, it has recently had a near-20% pullback. So I think it’s a good time to start building a position.

Intuit

Finally, I also like the look of Intuit (NASDAQ: INTU) right now. It’s a leading provider of accounting solutions, and the owner of QuickBooks.

There’s a lot to like about Intuit from an investment point of view, to my mind. One key attribute here is that its products are ‘sticky’. Once businesses sign up for an accounting product, they’re unlikely to switch to a competitor, due to the time and costs involved in switching. This means revenues are quite predictable.

Secondly, the company has a strong growth track record, and is very profitable. Over the last three years, revenue has climbed 60% and return on capital employed (ROCE) has averaged more than 30%.

Like MSFT, Intuit could underperform if sentiment towards tech stocks continues to deteriorate. In the short term, this is definitely a risk.

All things considered however, I see a lot of appeal here. After a recent pullback, the stock now trades at 35 times next fiscal year’s forecast earnings, which I think is a very fair valuation.

Rupert Hargreaves: Bloomsbury Publishing

Bloomsbury Publishing (LSE: BMY) is my top British growth stock for January. A rise in the demand for reading material through the coronavirus pandemic has generated windfall profits for the company over the past two years.

Bloomsbury aims to capitalise on this newfound love of reading in the years ahead. Analysts believe this will translate into earnings growth of 11% this year and 10% in 2023.

Of course, this growth is not guaranteed. Rising inflation could cause consumers to cut back on spending on non-essential items like books. Despite this headwind, I would buy the stock for my portfolio.

Rupert Hargreaves does not own shares in Bloomsbury Publishing.

Zaven Boyrazian: Frontier Developments

Frontier Developments (LSE:FDEV) is a game development studio and publishing house. It’s responsible for a popular collection of titles, including Elite Dangerous and Jurassic World Evolution.

The stock took a significant hit in 2021 after management lowered its revenue guidance due to underperforming sales. However, its first entry of the Formula 1 franchise is coming out later this year, along with multiple other projects through its publishing arm.

Personally, I think the lineup of new releases could drastically boost sales again. And with further franchise titles coming out in 2023, including Warhammer, the stock looks like it has excellent growth potential in my mind.

Zaven Boyrazian owns shares in Frontier Developments.

Royston Wild: B&M European Value Retail 

City analysts don’t expect B&M European Value Retail (LSE: BME) to record ripping earnings growth in the near term. In fact, they’re expecting profits to reverse over the next 12 months or so as supply chain costs balloon. It’s my opinion, however, that earnings could actually surprise positively as shoppers seek out bargains in this high-inflationary environment. Indeed, B&M’s trading statement in early January showed profits exceeding analyst estimates.

This FTSE 100 share is unlikely to be a flash in the pan. Discount grocers Aldi and Lidl have grown rapidly over the past decade as consumers prioritise value. Encouragingly, B&M is expanding rapidly to make the most of this opportunity, too.

Royston Wild does not own shares in B&M European Value Retail.

G A Chester: Gym Group 

Low-cost operator Gym Group (LSE: GYM) was expanding and delivering strong revenue and cash-flow growth before the pandemic. Inevitably, government-mandated shutdowns had a negative impact on the business. 

There remains some risk from coronavirus, but I think Gym is cheaply valued on its pre-pandemic cash flows. Furthermore, it’s well funded to exploit an unprecedented growth opportunity coming out of the pandemic. 

Due to large numbers of store closures in UK towns and cities, the company has been offered dozens of high-quality sites on attractive terms. Management has never seen the property market so favourable and is taking full advantage to accelerate expansion. 

G A Chester has no position in Gym Group.

Ed Sheldon: Sage

My top British growth stock for January is Sage (LSE: SGE). It’s a leading provider of cloud-based accounting and payroll solutions with a focus on small and medium-sized businesses.

I’m bullish on Sage for a couple of reasons. Firstly, I expect the company to benefit from the ongoing global economic recovery. Better economic conditions should lead to higher demand for the company’s accounting solutions.

Secondly, the valuation seems very reasonable. Currently, Sage sports a forward-looking P/E ratio of around 32. By contrast, US rival Intuit currently trades at around 50 times this year’s forecast earnings.

One risk to consider here is competition from Intuit and other players such as Xero. I think this risk is baked into the valuation, however.

Edward Sheldon owns shares in Sage and Xero.

Roland Head: Electrocomponents

Profits at industrial and electronic parts supplier Electrocomponents (LSE: ECM) have risen by an average of 40% per year since 2016.

According to CEO Lindsley Ruth, trading was strong during the third quarter. He now expects results for the year to 31 March to be ahead of broker forecasts. My sums suggest we could see earnings growth in excess of 40% in 2021/22.

The main risk I can see is that with the stock trading on 26 times forecast earnings, any disappointment could cause the shares to slide. However, I expect further growth.

Roland Head does not own shares of Electrocomponents.

Christopher Ruane:  S4 Capital

After strong growth for most of 2021, digital ad group S4 Capital (LSE: SFOR) fell in the final quarter. It had a weak start to 2022. Like S4 boss Sir Martin Sorrell, I have increased my holding this month.

One risk is the cost of integrating acquisitions eating into profits. But the company continues to grow aggressively, acquiring another US agency this month. For 2022 it is targeting 25% growth in both gross profit and net revenue. S4 is set to benefit from growing spend on digital advertising. 

Christopher Ruane owns shares in S4 Capital.

Paul Summers: Biotech Growth Trust

Last year was pretty awful for shareholders of minnow-focused Biotech Growth Trust (LSE: BIOG). As a patient, long-term investor, however, I’ve been taking this period of selling pressure as an opportunity to load up.

Whether 2021 will see a return to form is hard to say. On an optimistic note, directors believe the valuations given to small-cap stocks in the sector are now “very compelling”. A rise in merger and acquisition activity, the passing of price legislation in the US and increased regulatory approval of drugs (held up by the pandemic) could also spark a recovery.

Paul Summers owns shares in Biotech Growth Trust

Harshil Patel: Alpha FX 

My top British growth stock for January is financial solutions company Alpha FX (LSE:AFX). It’s a founder-led British business focused on two areas: foreign exchange risk management and alternative banking. 

Trading has been strong, and the company has proven sales and profit growth over several years. I like that it has a diversified client base and client numbers are also growing.  

I’d say not only is Alpha FX a growth stock, but it’s also a good quality business with a double-digit profit margin. 

With a market capitalisation of under £1bn, I reckon it has much room to grow further.  

Harshil Patel does not own shares in Alpha FX.

Of course, if you’re a long-term investor like myself, volatility shouldn’t be feared. Long-term investors want to be buying shares at the cheapest levels possible and market pullbacks tend to provide great buying opportunities.

Recently, I’ve been thinking about the stocks I want to buy in the next market crash. With that in mind, here’s a look at two shares high up on my ‘buy list’.

The UK’s best fund managers love this stock

One stock I’d love to own is Intuit (NASDAQ: INTU). It’s a leading provider of accounting and financial software (QuickBooks and TurboTax are two of its main products). This stock is owned by a number of top fund managers including Terry Smith and Nick Train – two of the UK’s best stock pickers.

There’s a lot to like about Intuit, in my view. For starters, sales are ‘sticky.’ Once customers sign up to an accounting solution such as QuickBooks, they are unlikely to switch to a competitor as a switch would be time consuming and costly.

Secondly, Intuit has a great growth track record. Over the last five financial years, revenue has climbed from $4.2bn to $7.7bn. For the year ending 31 July, analysts expect revenue of $9.4bn.

Third, Intuit is a very profitable company. Over the last three years, return on capital employed (ROCE) has averaged 30%. Intuit currently trades at 47 times next year’s forecast earnings. That valuation looks a bit high to me. To my mind, the stock is priced for perfection. If growth stalls, the stock could underperform.

I’d prefer to buy the stock at a lower price. So, I’m hoping I can pick it up at a lower valuation in the next market crash.

A stock for the digital revolution

Another stock I’m hoping to buy in the next crash is Adobe (NASDAQ: ADBE). It’s a leading provider of creative software (Photoshop, Premiere Pro, etc). It also offers marketing and data analytics software.

The reason I’m bullish on Adobe is that the digital content market is growing rapidly. Just look at YouTube. Today, over 500 hours of content are uploaded to the platform every single minute (up from 35 hours in 2010).

Adobe is benefitting from the growth in content because it offers best-in-class creative software. Its video editing software, for example, is regularly ranked as the best software for creating YouTube videos.

The high demand for Adobe products is reflected in the company’s recent results. In the last quarter (ended 4 June), revenue was up 23%, while operating income was up 38%.

Annoyingly, I was very close to buying Adobe shares back in May when they were trading at around $475. I’m kicking myself for not buying because they have since shot up to $600.

At that price, the stock has a forward-looking P/E ratio of around 50. That’s not an outrageous valuation for a software stock but it doesn’t leave a huge margin of safety. If future growth is disappointing, the stock could take a hit.

So, I’m going to be patient here. Hopefully, I can buy the stock at a more attractive valuation in the next market crash.