Why I’m closely watching these 2 growth stocks

The share market is made up of different people with different opinions. That’s what makes the share market such a good marketplace, for every trade there’s a buyer and a seller at the trade price.

I can completely understand why some stocks are sold off if they disappoint the market or have guided that the near future isn’t going to be as good as predicted. But, sometimes, I think this presents an opportunity for a brave investor.

Indeed, the age-old advice of Warren Buffett is always good advice for a quality business ‘Be fearful others are greedy and greedy when others are fearful’.

So, with that in mind, here are two stocks I’m closely looking at after their reports:

InvoCare Limited (ASX: IVC)

InvoCare is one of my favourite businesses, as morbid as that sounds.

I like that it has very defensive earnings because sadly it’s inevitable that a certain number of people die each year. InvoCare has a leading market share in Australia and therefore almost guaranteed to keep getting business every year.

The growing population and ageing population means that InvoCare can reasonably predict, based on ABS numbers, that the death rate is going to increase until 2034 and beyond, which should be a consistent tailwind for revenue.

Management are confident that operating earnings will grow by roughly 10% over the long-term.

However, the share price was hit by double digits after its report with management saying that next year’s earnings will be flat due to investing in refurbishments for lots of its locations. The market is ‘short-termist’ most of the time, so this news wasn’t appreciated.

I think InvoCare could be a good long-term market-beater at the current price, but I’m going to wait to see if the share price drops lower before buying.

BWX Limited (ASX: BWX)

BWX was another to report and suffer a huge drop in the share price.

It has acquired a lot of businesses over the past year, it has many brands and many countries it’s trying to expand in. Perhaps it’s suffering from acquisition indigestion, perhaps it now has too many brands to focus on.

Either way, the business didn’t grow its underlying earnings or its new acquisitions as much as investors were expecting.

However, I don’t believe that BWX should be written off at such an early stage. The acquisitions were made to expand BWX’s original brands, mainly Sukin, into the USA and it’s only just at the start of that journey.

I believe that BWX will be able to grow its brands, revenue and profit successfully over the long-term and I think the current share price could offer a long-term opportunity. There is a chance that it could drop lower towards $4.50 (or further), which is why I’m holding off for the moment to see if I can get the best value I can for my purchase price.

Foolish takeaway

I believe that both shares will beat the market in a time frame of two years and beyond, but the next year could be bumpy if they both don’t get back on track quickly.

I’m also keeping my eye on these hot stocks because they could easily beat the market over the next year.

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Motley Fool contributor Tristan Harrison owns shares of BWX Limited and InvoCare Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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