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Overpriced. Overhyped. Unsustainable momentum.
You've probably heard people say these kinds of things about hot growth stocks. For some stocks, the descriptions are applicable -- but not for all of them. Some hot growth stocks deserve the attention that they attract from investors and their premium valuations. Why? Their business models and growth prospects are simply that good.
Three hot growth stocks that I'd buy right now are Guardant Health (NASDAQ: GH), MongoDB (NASDAQ: MDB), and The Trade Desk (NASDAQ: TTD). Here's why I think these stocks still have plenty of room to run.
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1. Guardant Health
Guardant Health conducted its initial public offering (IPO) in October 2018 and has absolutely skyrocketed since then. Shares are up nearly 170% over the last nine months.
Investors have flocked to Guardant Health because of the tremendous potential for its liquid biopsy products. Liquid biopsies are blood tests used to detect cancer. Instead of using an invasive procedure to obtain cancerous tissue, liquid biopsies work by spotting tiny fragments of DNA that have broken away from tumors or sometimes intact tumor cells that have separated from the main tumor.
Guardant Health's Guardant360 liquid biopsy matches advanced-stage cancer patients with the most applicable treatment. Its GuardantOmni product helps drugmakers screen patients for clinical trials of cancer drugs. The company's latest product is its Lunar DNA tests for detecting early-stage cancer and cancer recurrence. For now, the Lunar tests can only be used by researchers.
How big is the potential market for these liquid biopsies? Guardant Health thinks there's a $6 billion opportunity in the U.S. alone for Guardant360 and GuardantOmni. But that's practically chump change compared to the $33 billion estimated U.S. market for the Lunar tests.
With a market cap of around $7.4 billion, Guardant Health doesn't have to capture all that much of its potential market to keep its sizzling momentum going. I don't own this stock yet, but it's at the top of my list to buy.
2. MongoDB
MongoDB's share price has more than tripled over the last 12 months and is up more than 80% so far this year. These huge gains have given the company a market cap of more than $8 billion despite MongoDB continuing to lose money. That doesn't bother me a bit, though.
The company is a leader in what are called NoSQL databases. Most databases used by businesses were designed decades ago for structured data organized in rows and columns. MongoDB, though, designed its database for today's world of both structured and unstructured data.