A New Core for the World's Greatest Growth Portfolio

At the beginning of 2012, I set out to form what I oh-so-modestly called "The World's Greatest Growth Portfolio." So far, the portfolio has lived up to its moniker, returning 28% for the year, and outperforming the S&P 500 by just under 10 percentage points.

The thesis for forming the portfolio was pretty simple: Invest first and foremost in companies that demonstrate exceptional levels of innovation, with special emphasis given to those that I believe will be around decades from now.

Today, I'm revealing the four companies that will make up the core of 2013's portfolio. These are companies that I'm almost certain will be leading the way in their respective industries a decade from now. Each of the companies will get an 11.5% allocation in the portfolio.

So without any further ado, here are this year's Core stocks:

Baidu (NASDAQ: BIDU  )
This company runs China's most popular Internet search engine. Currently, it holds an 80% share of the Internet search market in China; it is the most visited site in China and South Korea, and fifth-most popular website worldwide.

Over the past five years, Baidu has increased revenue by an average of 63% per year, and increased earnings by 75% per year. With numbers like that, you'd think the company would carry a pretty heavy valuation. But with worries about competition and an SEC investigation into auditors in China, the stock now trades for just 23 times earnings -- which is just about the lowest its ever traded for.

I'll admit that if accounting irregularities pop up, my thesis will likely be way off base. But with the Chinese Internet community growing so quickly, and the company showing it knows how to execute on its plans, I believe it can be a stalwart for years to come.

Google (NASDAQ: GOOGL  )
There's a reason I list Google second here: It's basically the English-speaking version of Baidu. In fact, Baidu has in many ways followed in the innovative footsteps of Google.

Globally, Google enjoys a remarkable 84% market share for Internet searches. That's astounding. And when you consider the innovative ancillary products the company is working to monetize -- YouTube, Gmail, Android, and Chrome, to name a few -- you get an idea for why I think Google will be in the top spot for years to come. And though the company may not be showing the ridiculous growth rates that its Chinese counterpart is, I have full faith that Larry Page will spend money wisely to continue investing in the future of Google.

Amazon.com  (NASDAQ: AMZN  )
There are two big reasons for me to invest in Amazon -- a company I've often referred to as my highest-conviction long-term holding in the stock market.

The first advantage that eases my mind is Amazon's buildout of fulfillment centers. These centers -- which cost a fortune to build and maintain -- help ensure that the products you order on the Web get to your front door as quickly as possible. I mention that the centers are expensive because this makes it prohibitively expensive for any company to try to match Amazon's customer service reach.

The second reason I'm big on the company is that founder and CEO Jeff Bezos has a history of innovation. Whether it's allowing customer reviews to be published for all to see (which was derided when it started, but has now become a mainstay on many product websites), or the dawn of the era of the Kindle e-readers, Bezos seems to know what customers want.

Whole Foods Market  (NASDAQ: WFM  )
Last on my list is Whole Foods, which is still run by co-founder John Mackey. The company has not only helped change Americans' relationship to their food, it has redefined what the grocery shopping experience can be like.

From 2000 to 2010, the average annual growth of American spending on food has been 3.05%. However, the slice of the pie going toward organic food has been increasing by leaps and bounds. Organic-food sales have grown by an astounding 15.9% per year, but still only account for 4% of all food sales nationally. 

Knowing that, and the fact that the company has only built out about one-third of its stated goal of 1,000 stores in the United States, I think Whole Foods will be a common name for many years.

What's next?
You may have noticed that Intuitive Surgical (NASDAQ: ISRG  ) , a Core stock from last year, wasn't included here. Tune in later -- when I reveal my Tier One stocks -- to see why.

In the meantime, I highly encourage you to read up on Baidu, as I've dubbed it my favorite stock for 2013.

Regardless of your short-term view on the Chinese economy, there may be opportunity in Baidu. Our brand new premium report breaks down the dominant Chinese search provider's strengths and weaknesses. Just click here to access it now.


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