10 Best Growth Stocks to Buy for the Long Term

Growth stocks had the upper hand in 2023: The Morningstar US Growth Index outperformed the Morningstar US Value Index by more than 26 full percentage points for the year. But the early gap in 2024 year-to-date returns has disappeared.

What does this reversal mean for growth stocks?

Since the end of March 2024, the Morningstar US Growth Index declined nearly 6% through May 7. “Between this pullback and a few modest increases in our fair values, stocks within the growth category are now trading near fair value,” observes Morningstar’s senior US market strategist Dave Sekera. “However, within the growth category, stocks trading at much of a discount to fair value have become increasingly harder to find. As we forecast the rate of economic growth is poised to slow over the next few quarters, we prefer investing in higher-quality companies with wide economic moats.”

Our best growth stocks to buy for the long term share a few qualities:

• They land in the growth portion of the Morningstar Style Box.
• The stocks are from companies included on Morningstar’s list of the Best Companies to Own for 2024. Companies on this list have wide Morningstar Economic Moat Ratings and predictable cash flows, and they are run by management teams that make smart capital-allocation decisions.
• They look reasonably priced, which means they’re trading below or near Morningstar’s fair value estimates.

10 Best Growth Stocks to Buy for the Long Term

The 10 most reasonably priced growth stocks from Morningstar’s Best Companies to Own list as of May 7, 2024, were:

1. Autodesk ADSK
2. Coloplast CLPBY
3. ServiceNow NOW
4. RELX RELX
5. Microsoft MSFT
6. Berkshire Hathaway BRK.B
7. Tyler Technologies TYL
8. Taiwan Semiconductor Manufacturing TSM
9. Airbus EADSY
10. AstraZeneca AZN

Here’s a little bit about each of these growth stocks for the long term. Data is as of May 7.

Autodesk

• Price/Fair Value: 0.78
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Mid-Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Software—Application

Software application company Autodesk tops our list of best growth stocks to buy this month. We view Autodesk as the global industry standard computer-aided design software, says Morningstar analyst Julie Bhusal Sharma, and we think the firm will stay at the forefront of industry trends. Over 95% of Autodesk’s revenue is now recurring after the company gradually transitioned from licenses over the past eight years. The change enables Autodesk to extract greater revenue per user as it upsells its loyal and increasingly maturing base, adds Bhusal Sharma. Autodesk’s stock is 22% undervalued relative to our $275 fair value estimate.

Coloplast

• Price/Fair Value: 0.86
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Medical Instruments and Supplies

Coloplast stock is 14% undervalued relative to our fair value estimate of $14.10 per share. Based in Denmark, Coloplast is a leader in global ostomy and continence care. The firm has a long record of consistent and meaningful innovation that has led to a dominant position in Europe. Share prices fell when Coloplast management reduced its fiscal 2024 outlook owing to a smaller expected operating margin, but Morningstar’s fair value estimate remains intact. Morningstar senior analyst Debbie Wang expects the firm’s operating margin to return to its historical benchmark of 30% in fiscal year 2026.

ServiceNow

• Price/Fair Value: 0.90
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Software—Application

The second of three software application companies on our list of best growth stocks, ServiceNow stock trades at a 10% discount. The company built a best-of-breed software as a service solution for IT service management, then branched out into IT operations management, and has since moved beyond the IT function to become an indispensable solution, explains Morningstar senior analyst Dan Romanoff. ServiceNow’s success has been rapid and organic, he adds. The firm already offers high-end enterprise-grade solutions and boasts elite-level customer retention of 98%. ServiceNow delivered good first-quarter results, including strong profitability, coupled with in-line guidance for the second quarter, which led us to increase our fair value estimate to $790 from $770.

RELX

• Price/Fair Value: 0.92
• Morningstar Uncertainty Rating: Low
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Specialty Business Services

UK-based RELX is new to our list of best growth stocks to buy this month. RELX is a global provider of business information, analytics, and decision-making tools for professionals in various industries. It generates revenue mainly by creating and selling access to curated information databases, analytics, and journals. It also organizes major events such as trade shows and conferences. The core tenet of RELX’s strategy is to expand its portfolio of information-based analytics and decision-making tools to help its customers be more productive and make better decisions in their day-to-day workflow, says Morningstar senior analyst Rob Hales. Investors can typically expect mid-single-digit organic revenue growth and a 10- to 40-basis-point increase in adjusted operating margin each year in what we think is a low-uncertainty business, he adds. RELX stock is 8% undervalued relative to our fair value estimate of $46.75 per share.

Microsoft

• Price/Fair Value: 0.94
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Software—Infrastructure

Microsoft is one of two public cloud providers that can deliver a wide variety of platform-as-a-service/infrastructure-as-a-service solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in artificial intelligence, says Morningstar’s Romanoff. We believe that Azure is the centerpiece of the new Microsoft. Even though we estimate it is already an approximately $58 billion business, it grew at an impressive 30% rate in fiscal 2023. We believe Microsoft enjoys a position of excellent financial strength arising from its strong balance sheet, growing revenue, and high and expanding margins. Microsoft stock is currently 6% undervalued relative to our $435 fair value estimate, which we increased from $420 per share given stronger near-term growth and profitability.

Berkshire Hathaway

• Price/Fair Value: 0.95
• Morningstar Uncertainty Rating: Low
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Insurance—Diversified

We view Berkshire’s decentralized business model, broad business diversification, high cash-generation capabilities, and unmatched balance sheet strength as true differentiators for the firm, says Morningstar strategist Greggory Warren. While Berkshire Hathaway has had large cash balances over the past decade, which earned next to nothing in a near-zero short-term interest-rate environment, we believe the company is now focused on reducing its cash hoard through a mixture of stock investments and share repurchases. The company has also sought out higher-dividend-yielding securities when purchasing equity securities and is currently benefiting from higher short-term rates on its cash balances. We don’t believe the death of Vice Chairman Charlie Munger and the eventual departure of Chairman and CEO Warren Buffett will affect the company, as Berkshire has laid the groundwork for a successful transition in leadership. Berkshire Hathaway’s B shares trade 5% below our fair value estimate of $427 per share.

Tyler Technologies

• Price/Fair Value: 0.96
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Mid-Growth
• Morningstar Capital Allocation Rating: Standard
• Industry: Software—Application

Tyler Technologies is the clear leader in the underserved niche market of government operational software, argues Morningstar’s Romanoff. We think there’s a decadelong runway to growth at Tyler, as the push for local governments to modernize their legacy enterprise resource planning systems intensifies. We see Tyler’s expanding portfolio as driving larger deals that encompass more solutions. It now has established enough of a reputation in the market that it is called upon in most relevant government system searches. Tyler Technologies stock trades 4% below our $500 fair value estimate.

Taiwan Semiconductor Manufacturing

• Price/Fair Value: 0.97
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Semiconductors

Taiwan Semiconductor Manufacturing is the world’s largest dedicated contract chip manufacturer, with an almost 60% market share. The firm’s disciplined approach to capital spending in 2024—and possibly in the next few years—reduces risks of oversupply and allows more flexibility in cutting-edge research to maintain its leadership, argues Morningstar analyst Phelix Lee. Taiwan Semiconductor stands to benefit from the growth of artificial intelligence, the Internet of Things, and high-performance computing applications, which may last decades. Taiwan Semiconductor stock trades just below our fair value estimate of $146 per share.

Airbus

• Price/Fair Value: 0.98
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Aerospace and Defense

Airbus, which looks fairly valued relative to our fair value estimate, primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing BA in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow, and we expect this duopoly to continue, says Morningstar analyst Nic Owens. Airbus is well-positioned to take advantage of increasing global commercial air travel. We think Airbus stock is worth $43.80 per share.

AstraZeneca

• Price/Fair Value: 0.98
• Morningstar Uncertainty Rating: Medium
• Morningstar Style Box: Large Growth
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Drug Manufacturers—General

AstraZeneca rounds out our list of best growth companies to buy for the long term. The only drugmaker on the list, AstraZeneca maintains one of the strongest pipelines in the drug group, and the company has several key products in development that hold blockbuster potential, argues Morningstar director Damien Conover. As high-margin specialty drugs continue to represent a larger proportion of sales, profit margins should expand over the next five years, too, he adds. AstraZeneca stock is trading near our $78 fair value estimate.

What Are the Morningstar Style Box and Fair Value Estimate?

The Morningstar Style Box is a nine-square grid that provides a graphical representation of the investment style of stocks, bonds, or funds. Based on a series of inputs—including a company’s historical and long-term projected growth and its historical and forward-looking price multiples—a stock is classified as either a value stock, a growth stock, or a core stock. A stock is also classified as either small-cap, mid-cap, or large-cap based on its market capitalization.

The fair value estimate, meanwhile, represents what Morningstar analysts think a particular stock is worth. Fair value estimates are rooted in fundamentals and based on how much cash we think a company can generate in the future, not on fleeting metrics such as recent earnings or current stock price momentum.

How to Find More Growth Stocks to Buy

Of course, there are many other criteria investors can use to find growth stocks to buy for the long term. Here are some tools that investors can use to find more growth-stock ideas to research further:

• Investors can review Morningstar’s lists of large-cap growth stocks, mid-cap growth stocks, and small-cap growth stocks. The lists aren’t restricted by quality or valuation; rather, they’re complete lists of the growth stocks in Morningstar’s database.
• Investors can use the Morningstar Investor screener to more easily compare growth stocks with each other. One way would be to screen by Stock Style under the Criteria drop-down menu, choosing large growth, mid-growth, small growth, or some combination thereof. Then once you have your results, click on Data & Columns to select Financials data points in the Stocks area. These might be valuation metrics like price/earnings ratios or revenue growth, among others. Then click Update. Once back to the list of stocks, click on the data point that matters most to you to rank the list on that particular data point.
• Investors who’d rather invest in growth stocks through a managed product like an exchange-traded fund or a mutual fund can find ideas to research further in The Best Growth Funds.