3 Great Growth-Investing Stocks

Make your growth investing better by seeking bargains.

May 21, 2014 at 5:34PM

It's hard to argue against growth investing, where you focus on companies that are growing at a brisk pace. Sure, value investing is effective -- buying undervalued stocks that have nowhere to go but up. But you might get the best of both worlds by combining the two strategies, seeking companies that are growing rapidly and also sport compelling valuations.

Here are three stocks that a growth-investing enthusiast should consider.

Baidu Inc (NASDAQ:BIDU) is a China-based search-engine giant, with revenue and earnings per share growing by an annual average of 56% and 44%, respectively, over the past three years. It does face able competition, but its size gives it an advantage, as it's able to reinvest lots of earnings in growing its top line. That strategy has been working, as the company is now profitable, unlike many other growth-investing stars. Baidu's first-quarter results featured earnings topping expectations and revenue meeting them. Revenue was up a hefty 59% over year-ago levels, while net income rose 24%. Many China-based stocks have been pressured as China's growth rate has slowed, but the long-term potential in China remains of great interest to growth investing aficionados as the populous nation's middle class grows and consumes more. Growth in online users has been particularly brisk. Early this year it was reported that China now has more than 600 million Internet users, up almost 10% in one year. Meanwhile, Baidu is gaining ground in the important mobile arena, and is reportedly talking with Chinese travel-booking specialist Ctrip.com about some joint operations.

With a P/E ratio around 32, Baidu's valuation is nowhere near nosebleed levels. Its stock is up about 57% over the past year and has averaged annual gains of 45% over the past five. Its net margins are near nosebleed levels, topping 30%.

Catamaran Corp (NASDAQ:CTRX) is another candidate for those drawn to growth investing. It isn't a familiar name to many people, but it's not a tiny enterprise. The pharmacy benefit manager (and health care information technology specialist) sports a market capitalization near $9 billion, and its revenue and EPS have been growing by an annual average of 70% and 28%, respectively, over the past three years. It's attractively priced, too, with a forward price-to-earnings ratio near 15 -- well below its five-year average of 43 -- and a current P/E near 32. Catamaran is poised to benefit from millions more people having health insurance via Obamacare, as that's likely to result in millions of new prescriptions. Catamaran's first quarter was a growth-investing dream. Results featured estimate-topping revenue and earnings that rose 53% and 16%, respectively, over year-ago levels. Cash flow from operations more than doubled. The company bought competitor Restat last year. In a presentation for investors, Catamaran cites growth drivers such as the aging population, increased drug utilization, drug price inflation, and a brisk growth rate for Medicaid spending.

Silicom Ltd (NASDAQ:SILC), based in Israel, specializes in networking and data infrastructure equipment. Its revenue and EPS have been growing by an annual average of 28% and 33%, respectively, over the past three years. Its last quarter's results beat estimates handily, but the stock sank for reasons (such as a tax-rate increase) not quite fathomed by my colleague Wade Michels, who said, "This business is too good and the management team is too focused for this business to stay this cheap for long. The market's reaction to earnings has presented us with a nice buying opportunity." Silicom's offerings include a new virtualization offloading product, the SmartSilc VHIO, which can make cloud computing more efficient. Among other things, bulls like the company's rising net margins and its deepening relationship with Intel. Those interested in growth investing should find Silicom attractively priced, too, with a forward price-to-earnings (P/E) ratio near 16, well below its five-year average of 18. The stock offers a dividend yield of 2.2%.

If you want to give your portfolio a good chance of growing briskly, take some time to learn more about growth investing. Just be sure to pair your growth investing with attention to stock valuation.

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Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, owns shares of Baidu, Ctrip.com International, and Intel. The Motley Fool recommends Baidu, Catamaran, Ctrip.com International, and Intel. The Motley Fool owns shares of Baidu, Catamaran, and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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