Growth stocks have been on an incredible run since the end of the 2008 financial crisis. While the information technology sector has led the charge, innovation-driven companies across various industries have caught the eye of both professional and retail investors. From defense to space exploration to biotechnology, scores of early-stage companies in these industries have seen parabolic growth over the past 15 years.

Including a handful of emerging growth stocks in your portfolio can a be smart move. But it’s crucial to balance their upside potential with their inherent risks. Let’s examine two companies that stand out as potential top buys for long-term investors: Prime Medicine (PRME -4.43%) and Rocket Lab USA (RKLB -9.20%).

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A gene-editing pioneer

Prime Medicine is pioneering the frontier of genetic medicine with its innovative prime-editing technology. This cutting-edge approach allows for precise DNA modifications, potentially offering solutions for a wide range of genetic disorders that have long eluded effective treatment.

The company’s pipeline is ambitious, targeting high-impact diseases such as chronic granulomatous disease, cystic fibrosis, and glycogen storage disease. While technically still in the preclinical stage, with human trials slated to start soon, initial results have shown promise, hinting at the transformative potential of Prime Medicine’s technology.

For investors looking to gain exposure to the revolutionary field of gene editing, Prime Medicine presents an intriguing opportunity. However, it’s crucial to approach this investment with a clear understanding of its long-term nature.

Given the company’s early-stage status and the lengthy road to market typical in biotech, Prime Medicine is best viewed as a slow-accumulation play. This is particularly important to bear in mind in light of Wall Street’s consensus 215% upside potential for the stock over the next 12 months.

Put simply, it may be tempting to buy the stock hand over fist in response to this overtly bullish stance by analysts, but the truth is, Prime Medicine’s stock probably won’t really start to move until mid-stage study results start to become available around 2029. That may sound off-putting, but lengthy development timelines are the norm in biotechnology.

Another reason to consider Prime Medicine is its top-tier shareholder base. Alphabet, Cathie Wood’s ARK Invest, and the life sciences specialty hedge fund Baker Bros. Advisors all own significant amounts of shares of the gene-editing specialist, according to the most recent 13F filings with the Securities and Exchange Commission (SEC).

How to play this biotech? A prudent approach would be to allocate a small portion of your portfolio – under 1% – to Prime Medicine and employ a dollar-cost-averaging approach over a five-to-10-year period. This strategy allows investors to participate in the potential upside while managing the considerable risks associated with clinical trials and regulatory approvals.

It’s worth noting that Prime Medicine’s journey to becoming a commercial operation could span up to a decade. As such, this growth stock is ideally suited for patient investors willing to gradually build their position as the company’s clinical program advances.

A top space play

Rocket Lab USA is making waves in the commercial space industry with its small satellite launch services and spacecraft components. As demand for satellite-based services grows across industries like telecommunications, Earth observation, and navigation, Rocket Lab is poised to capture a significant share of this expanding market.

The company’s Electron rocket has demonstrated its reliability through multiple successful launches. Building on its early success, Rocket Lab is now developing a larger rocket called Neutron to tackle a wider range of mission profiles.

Rocket Lab’s vertical-integration strategy, which includes manufacturing its spacecraft components, could enhance profit margins and create unique competitive advantages. This approach may also unlock new market opportunities for the company as it innovates.

What’s the risk? While offering enormous potential, the space industry is highly competitive and requires substantial capital investment. Rocket Lab’s future success hinges on its ability to scale operations and maintain its technological edge in a rapidly evolving market.

Investors considering Rocket Lab should thus adopt a long-term perspective, potentially starting with a small position and increasing it as the company achieves key operational milestones. However, shareholders should be prepared for significant volatility, given the emerging nature of both the space industry and Rocket Lab’s platform.