I'm Buying More of This High-Growth Stock

It's been something of a roller coaster owning Tile Shop (NASDAQ: TTS  )  stock over the last year. But that was to be expected, given the high-growth nature of the retailer. The stock got hit really hard recently after the company's earnings report and a manipulative article on its allegedly contaminated products. If we look several years out, the potential for this company is great. That's why my Special Situations portfolio is taking advantage of the recent price weakness to add more money to the stock.

Recent results
The recent news from Tile Shop has been remarkably good. In the third quarter, sales were up 28%, with same-store sales climbing a remarkable 14.8%. That's almost unheard of. In addition to the strong performance at the shop level, the company continues to build out its store network rapidly. For the year, Tile Shop plans on opening 20 new stores on its 2012 year-end base of 68 -- unit growth of more than 29%. So sales should continue growing briskly next year. And the economics of each store are phenomenal, with a payback on investment in two-and-a-half years.

This is my third purchase of Tile Shop, following my first acquisition last December. You can read the original article here, including the initial reasons why I liked the company. But here's the summary: The company has excellent unit economics and a long runway for growth. In addition, it's benefiting from a cyclical increase in home purchases. As long as same-store sales continue to hold up, I'm very comfortable owning this position. Looking out five to 10 years, it's hard not to see this stock being a multibagger.

Because it's a high-growth stock, Tile Shop is particularly susceptible to the vicissitudes of the market. If the market goes down 10%, Tile Shop might go down 20%. That's just how things work with these types of stocks. That's fine, because I would simply add more to the position. At $15 or $16, I would add significantly to this position, despite the fact that it would be my fourth purchase of the stock.

Great long-term potential
So for now I'm adding $1,000 to the stock and continuing to watch closely. Of all the stocks in my Special Situations portfolio, Tile Shop has the greatest potential for long-term return.

Interested in Tile Shop or have another stock to share? Join me on my discussion board or follow me on Twitter (@TMFRoyal).

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Read/Post Comments (16) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 14, 2013, at 10:40 AM, boundiron wrote:

    So, do you now have a different opinion..

  • Report this Comment On November 14, 2013, at 10:52 AM, webattorney wrote:

    I didn't buy this one because I read that their stores were not doing well. Something smelled fishy about this one.

  • Report this Comment On November 14, 2013, at 11:29 AM, giacomofaustini wrote:

    Have you changed your mind today?

  • Report this Comment On November 14, 2013, at 11:32 AM, giacomofaustini wrote:

    This is the second time Gotham research fires on a TMF stock: EBIX and now TTS.

    Are they manipulating the market being shorters (SEC where are you?) or are they right?

  • Report this Comment On November 14, 2013, at 11:37 AM, giacomofaustini wrote:

    This is the second time Gotham research fires on a TMF stock: EBIX and now TTS.

    Are they manipulating the market being shorters (SEC where are you?) or are they right?

  • Report this Comment On November 14, 2013, at 11:39 AM, StACC wrote:

    Well, I certainly hope to hear something soon from TMF regarding their stance on this.

  • Report this Comment On November 14, 2013, at 12:09 PM, steelcityjoe wrote:

    .......looks like this one is going to turn out the same way the Irish Bank stock did for me....only FB can save me now......oh well,live and learn

  • Report this Comment On November 14, 2013, at 12:14 PM, giacomofaustini wrote:

    Is anybody out there? 10% promise? Uoooohhhh?

  • Report this Comment On November 14, 2013, at 12:54 PM, Airpass wrote:

    Waiting for guidance from Motley fool.

  • Report this Comment On November 14, 2013, at 1:14 PM, ginalo wrote:

    SHOCKED! to see my TTS down over 40% today. What happened? Anyone?

  • Report this Comment On November 14, 2013, at 1:25 PM, ginalo wrote:
  • Report this Comment On November 14, 2013, at 2:04 PM, giacomofaustini wrote:

    You have made a very foolish due diligence and I've been fool enough to trust you.

  • Report this Comment On November 14, 2013, at 2:16 PM, FoolTheRest wrote:

    Try not to get trampled running for the door, everyone.

    Or you could sit tight and give TMF some time to read through and analyze the 58-page report Gotham issued just today.

  • Report this Comment On November 14, 2013, at 2:36 PM, Inmate3030 wrote:

    I would like to see a response by the Motley Fool on this too. I bought this stock a couple weeks ago based on a writeup by one of your contributors. It is a lucky thing that I read the Gotham City report this morning and sold it all for a small loss. I had the foresight to buy a bunch of puts first thing this morning and did very well.

  • Report this Comment On November 14, 2013, at 3:06 PM, FoolTheRest wrote:

    ^Congrats on your six-hour trade. I am pretty sure that is about the average hold time advocated around here.

  • Report this Comment On November 14, 2013, at 3:24 PM, giacomofaustini wrote:

    "At $15 or $16, I would add significantly to this position, despite the fact that it would be my fourth purchase of the stock." So now our bold friend is avidly buying TTS. Very foolish.

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