Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



I Love Growth Stocks

Premium merchandise is better than cheap merchandise. That's just how it works, whether you're talking about kitchenware, cars, or believe it or not, stocks.

How do I know? Several of the market's 10 best stocks from the last decade were selling for well more than 20 times earnings -- a princely sum by most value standards -- before they became multibaggers.

But that's not why I love growth stocks. Here's why:

  1. High growth is often the domain of superior franchises.
  2. Superior franchises tend to have competitive advantages that protect profits for years, if not decades.
  3. Fast movers frequently grow in fits and starts when they're young, which can lead to mispricing by the market.

Notice that I didn't say the best stocks are inherently expensive, or that growth investors are free-spending loons who'll do anything to get a share of a superior business.

For me, and for the rest of my colleagues on David Gardner's Rule Breakers team, high-growth stocks are most attractive when they're reshaping billion-dollar industries in unusual ways.

Think of how we shop today. Malls are hardly efficient when it comes to buying what you need. Grocery stores are no better. Wouldn't it be easier to browse for most everything you need online, then reserve your goods before heading to the store?

That's possible. Just mix together a secure website with interactive video and a live link to the retailer's inventory system and -- voila! -- you've got a better shopping experience. Show me the firm that can do this, and I'll show you massive sales for Kroger, Safeway, Whole Foods, Wild Oats Markets, and every other grocery chain around the globe.

So, when searching for the market's best stocks for next 10 years, remember that history says it pays to buy into what pioneering investor Thomas Rowe Price Jr. (now better known by the firm that bears his name, T. Rowe Price) called "fertile fields of growth" -- emerging markets driven by innovation. There, hiding in the weeds, are the market's misunderstood multibaggers in the making.

What's sending Fools' hearts aflutter? Go back to our intro page to see what else we have a crush on.

Fool contributor Tim Beyers, who is ranked 1,123 out of more than 22,200 in our Motley Fool CAPS investor intelligence database, thinks his wife deserves the best growth stocks. That's why he's a regular contributor to David Gardner's Motley Fool Rule Breakers high-growth stock-picking service. Tim didn't own shares of any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. Whole Foods is a Stock Advisor pick. The Motley Fool's disclosure policy just sent your portfolio flowers.

Read/Post Comments (0) | Recommend This Article (2)

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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 521786, ~/Articles/ArticleHandler.aspx, 10/22/2016 2:00:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 16 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes