Investing in high-growth stocks and letting them run for years on end is one of the best ways to achieve outsized gains in the stock market. However, growth investing requires that you check your emotions at the door. Truly disruptive companies are often hidden behind lofty valuations and largely unproven business models. Investing in these companies takes time and patience. Below, three Motley Fool contributors explain why priceline.com (BKNG 2.05%), Tesla Motors (TSLA 1.85%), and Under Armour (UAA 1.03%) are three growth stocks to buy and hold for years to come.
Brian Stoffel (Priceline): A number of factors make Priceline a growth stock that you can buy and forget for years. First, let's tackle the issue of whether this is actually a "growth" company, as many might doubt such a status for a stock that is up 4,500% in the past 10 years.
Through the first nine months of 2014, the online travel booking site grew revenue by an impressive 26%, while earnings per share shot up by 28%. For a company sporting a $60 billion market cap, those are impressive numbers. And with the stock down 16% from its 2014 high, it now trades for a reasonable 22 times non-generally accepted accounting principles earnings.
Moving forward, the company can count on the airline ticket business to provide steady, if not necessarily stellar, growth. The big drivers of the future will likely be in hotel bookings and car rentals, but investors should not overlook advertising revenue. Though it currently accounts for just 4% of all company revenue, the segment grew by 150% in the first three quarters of the year.
But perhaps most important for long-term investors is the moat that Priceline has built around itself. By owning some of the most trusted and respected names in online travel in North America and Europe -- including Kayak, booking.com, OpenTable, rentalcars.com, and agoda.com -- the business is well-buffered against competition. That should be music to a growth investors' ears.
Joe Tenebruso (Under Armour): When I search for investments to add to Tier 1, the real-money portfolio I manage for the Fool, I place a special emphasis on great leadership. I particularly enjoy -- and have been rewarded for -- investing in founder-led businesses. Not only do I not have to babysit these stocks, it gives me comfort to know that I'm invested beside visionary CEOs that lead their organizations with the passion of someone who built it from the ground up. For many of these men and women, the business they created and nurtured (and the impact it has on the world) is their life's work. As such, they don't manage for the next quarter or next year, but for years and even decades to come. That's the type of long-term perspective I like to see, because it aligns well with my multiyear investment horizon. I also believe a long-term focus helps to separate the truly great companies from the also-rans.
Source: Wikipedia.
One company that fits this description is athletic-apparel maker Under Armour. Founder and CEO Kevin Plank is one of my most trusted business leaders. Over the last two decades, Plank has built Under Armour into a business with nearly $3 billion in sales and a $14 billion market cap, all from the humble beginnings of selling T-shirts out of his car. And that incredible growth shows no signs of slowing: Plank and his team have delivered more than four straight years -- 17 consecutive quarters -- of at least 20% sales growth, including 34% revenue growth in Under Armour's most recent quarter. That is some of the highest and most consistent growth I've seen among all the companies I follow.
Now 42, Plank still owns more than 18% of the business -- a stake valued in excess of $2.5 billion. I like to see CEOs with a lot of skin in the game, because we Fools are not day traders -- we're part owners of the businesses in which we invest. With Plank at the helm, I'm confident Tier 1's investment is in good hands, and I look forward to profiting beside the Under Armour CEO for years to come.
Tamara Walsh (Tesla Motors): In just a few years, California-based electric-car maker Tesla has gone from one of the most shorted stocks on the Nasdaq into one of the top-performing companies on the market. Yet Tesla is still in the early stages of its growth story, which means there is likely more upside from here for patient investors.
The company is expected to make the first deliveries of its long-anticipated crossover EV, the Model X, in the third quarter of 2015. If the vehicle is even half as incredible as Tesla CEO Elon Musk claims, it could quickly become the company's best-selling EV. Additionally, the planned Gigafactory would by 2020 enable Tesla to produce enough lithium-ion cells each year to power 500,000 electric cars. While this is a number of years out, it would ultimately lower the cost of batteries and help to allow Tesla to sell its Gen 3 model to the masses -- rewarding long-term shareholders in the process.
Shares of Tesla Motors are up nearly 60% in the last year, and closed on Dec. 12 at $207. That's pricey by traditional valuation metrics. However, the company's innovative battery technology has the potential to disrupt both the auto industry and the solar energy storage space. Throw in Tesla's Supercharger network and the company's forward-thinking CEO, Elon Musk, and you have a stock with long-term growth potential. For these reasons, I believe Tesla Motors is a top growth stock to buy and hold for the long haul.
