Growth stocks are the beauties of the stock world, plain and simple. They're exciting, they have good stories, and they can make you a lot of money.
But for all their beauty, growth stocks are also the prima donnas of the market. They can be erratic, they don't always live up to their billing, and they tend to attract a shareholder base that's ready and willing to run at the first signs of slowdown. For those reasons, caution is often wise when you enter the world of growth investing.
Fortunately, The Motley Fool's CAPS service brings us the collective intelligence of more than 130,000 investors, making our community a great resource for separating the Jessica Albas from the Jabba the Hutts. Each of the stocks competing for this week's top spot has a market cap of at least $100 million, and each grew its net profit per share by an average of 20% or more per year over the past three years. (You can run the screen for yourself, if you like.) Let's go ahead and meet our contestants.
Enterprise Products Partners
Oil and gas majors such as ExxonMobil (NYSE: XOM ) seem to get most of the attention in that industry, but there's a lot more to that sector than Exxon -- even if some people do think it's the greatest company in the history of the world. The industry also includes some crazy deepwater drillers such as Transocean, along with more boring collections of processing and distribution assets, such as Enterprise Products Partners (NYSE: EPD ) . Even if it's not the most exciting company around, EPP has shown that boring can be beautiful. It's steadily grown its asset base while maintaining a manageable balance sheet, and it also features a nice 8.6% dividend.
Got potash? If you're a farmer, you likely do, since the chemical is one of the critical components in fertilizer. As the world population continues to grow, and arable land gets stretched further and further, it's becoming even more important for farmers to use every tool at their disposal to increase their yields. And as the world's largest supplier of potash and the third-largest producer of phosphates and nitrogen, PotashCorp (NYSE: POT ) hopes to be ready for this growing demand.
We all know Amazon.com (Nasdaq: AMZN ) , right? Once mainly an online bookseller, it now has a wide variety of fun wares that are devilishly easy to order over the web. Growing product offerings and attracting new customers helped the company nearly double its earnings per share between 2005 and 2008. With its first-quarter earnings report, it even proved its ability to grow right on through the recession.
For Motley Fool Rule Breakers pick Shanda Interactive (Nasdaq: SNDA ) , business is all fun and games. Shanda is a Chinese company that brings home the bacon by offering online games for customers in China. Based on the company's year-end results, it appears that many people in China are dealing with the global slowdown by hopping on their computers for some hardcore gaming action. Revenue and net income for the fourth quarter were up 42% and 17%, respectively. Of course, this only continues Shanda's growth binge, which has sent revenue skyrocketing 175% over the last four years.
Research In Motion
Apple (Nasdaq: AAPL ) who? iPhone or not, I see Research In Motion (Nasdaq: RIMM ) as the king of the hill in the U.S. smartphone market. Given the RIM BlackBerry's lock on corporate users, it'd almost have to make a determined effort to fail. Ok, maybe I'm getting a little ahead of myself, but the growth that RIM reported mid-recession was very impressive. So is the near-tripling of its earnings per share since 2007.
The envelope, please ...
The voting is in, and the CAPS community members have shared their opinions. Right off the bat, Amazon and Research In Motion are getting the boot. I like both businesses, but CAPS members tend to be sticklers for valuation, and both stocks sport -- well, let's just say some pretty healthy price points.
Though Shanda's three-star rating isn't quite as bad as the two stars stuck to Research In Motion or Amazon, it still won't make the finals of this stock showdown. There are some very convincing Shanda bulls on CAPS, but it's nonetheless received too many red thumbs to successfully reach top-tier territory.
PotashCorp's results are expected to dip this year, but that hasn't deterred CAPS members. The community -- myself included -- has bought in big time to the long-term potential in the agriculture sector, earning PotashCorp more than 4,400 outperform ratings and a four-star rank.
However, Potash's four stars just weren't enough to give it an edge over this week's top growth stock -- Enterprise Products Partners. EPP has notched 775 outperform ratings against a paltry 15 underperform ratings, securing a perfect five-star status. Why are CAPS members gaga over this company? Let's see what CAPS member Tachtician had to say in mid-2008:
Currently undervalued. As much as I like solar and wind and pretty much any alternative, we aren't going to be done with oil and gas anytime soon. Beyond that, whether oil and gas prices are high or low, they need to move it...and these guys get paid to do just that.
The dividends keep increasing, and insider buying has been strong, to say the least.
Now go vote!
Do you think that Enterprise Products Partners has what it takes to be America's next top growth stock? Head over to CAPS and let the rest of the community know what you think.