2 Growth Stocks That Scream Buy in October

Could October be a breakout month for the stock market this year? The S&P 500 is up about 20% year-to-date, and lower interest rates could lead to substantial financial activity. Financial companies will begin reporting third-quarter earnings in a few days, and positive news can send them soaring.

If you are looking for a great growth stock, Redfin (RDFN -6.69%) and Not Holdings (NOT -1.56%) they are two great candidates to buy right now.

Redfin is back in growth mode

Redfin is a real estate technology company that offers an online marketplace, live agents, data-driven analytics, and even mortgages. It is the most visited brokerage company with almost 50 million average monthly visits, or five times more than the nearest brokerage competitor.

This is a great setup for a business today that is disrupting traditional real estate with digital features that take it to the next level. However, since real estate has fallen into the pits, Redfin’s performance is under pressure. Revenue fell 9% year-over-year in 2023. But that was then, and revenue rose 7% year-over-year in the second quarter of 2024.

The market has noted the strong performance despite the unfavorable operating environment and is getting excited about the possibilities associated with lower interest rates. Redfin stock is up nearly 110% over the past three months.

Redfin is still an upstart, though, and not profitable. Its net loss improved from $321 million to $130 million in 2023, but deepened in the second quarter of 2024. It expects a loss of about $26 million in the third quarter, worse than last year’s 19 million dollars.

Wall Street analysts forecast a loss in 2025, though smaller than this year. Management said it would break even with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the full year, and that’s before the Federal Reserve cuts interest rates.

In other words, it’s already improving and gaining momentum, and the industry hasn’t even begun to turn around. According to Redfin’s own data, median home prices rose 3.2% in August and home sales fell 5.9%. But things will start to change, and while there’s plenty of risk here, Redfin could be a breakout stock as it benefits from its own strong business supported by economic tailwinds.

It’s not a flashy buy at any point

If you are looking for a growth stock with huge opportunities and sustainable profitability, Nu is your candidate. It’s an unusual stock to buy at any time, and with earnings data coming later this month, now is as good a time as any to buy before it rises further.

It does not offer digital financial services to consumers in Brazil, Mexico and Colombia. It is based in Brazil, where it has been operating for the longest time and has a strong position. It is the largest country in Latin America and 56% of the adult population is already on its platform, but it continues to add millions annually.

It’s nowhere near done there. In addition to new customers coming to its platform, it generates increased engagement at high rates. One of Nu’s leading measures is Average Revenue Per Active Customer (ARPAC) and is an important part of its results. Its strategy is to get satisfied customers to add more products and engage at higher rates, leading to higher ARPAC. That measure rose 30% year over year to $11.20 in the second quarter.

It is not yet a small player in Mexico and Colombia, where it is still a new player. But customers are joining these markets at a faster pace than in Brazil, and there is a long runway for growth as they settle.

In addition to offering high yield savings accounts, Nu now has a complete digital application with investment and insurance products. It has also developed a robust, high-performing credit business that includes credit cards and loans.

The results are currently and continue to be stellar. Revenue rose 65% year-over-year to $2.8 billion in the second quarter, and net income was $487 million, up 116% year-over-year.

Expect Nu, which happens to be a stock that Warren Buffett owns, to take advantage of positive earnings, but buy it for its huge long-term potential.