Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some growth stocks to your portfolio but don’t have the time or expertise to hand-pick a few, the Vanguard Growth ETF (NYSEARCA:VUG) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard Growth ETF (NYSEARCA:VUG)’s expense ratio — its annual fee — is a very low 0.10%.
This ETF aspires to beat the S&P 500 soundly, but over the past three and five years, it has slightly underperformed and outperformed it, respectively. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
It’s smart to seek undervalued stocks, as value investors do. But it can also be appealing to add some “growth” stocks to your portfolio in the hope of juicing its overall performance. Growth stocks offer significant growth potential, and some of them are undervalued.
More than a handful of rapidly growing companies had strong performances over the past year. Gilead Sciences, Inc. (NASDAQ:GILD) surged 131%, for example, with investors hopeful about its oral hepatitis C drug, sofosbuvir, which has cleared four phase 3 trials and received priority-review designation from the FDA. The company has also been doing well with its HIV drugs in recent years, though sales of some have been flagging and competition looms. The stock may not look like a bargain with a P/E ratio in the 30s, but its five-year projected earnings growth rate is around 26%.
Biotech giant Amgen, Inc. (NASDAQ:AMGN) popped 42%. Bulls are excited about drugs in its pipeline that tackle melanoma and ovarian cancer, among other diseases. Amgen, Inc. (NASDAQ:AMGN) is also looking to acquire Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), which would bring with it more cancer treatments and success in getting drugs approved for multiple indications. (Others are eyeing Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) as well.) Some see Amgen, Inc. (NASDAQ:AMGN) now so big that it can’t grow as rapidly as its smaller biotech brethren. But it does offer a solid dividend yield of 1.8% and seems more attractively valued than many rivals.