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3 High-Growth Stocks That Are Just Getting Started

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If these fast-growing companies aren't on your radar, you could be missing out.

It's been proved that owning top stocks for the long haul is a profit-friendly strategy, but it can be hard figuring out which growth stocks are worth buying. To help, we asked some of our Foolish investors to scour their universe and find top stocks that could only be in the early days of their growth. They came recommending Physicians Realty Trust (DOC 0.23%), Vertex Pharmaceuticals (VRTX -3.88%), and Activision Blizzard (ATVI -1.09%). Are these stocks right for your portfolio?

A 6% dividend and lots of room to grow

Matt Frankel (Physicians Realty Trust): One stock that could grow tremendously over the next few decades is Physicians Realty Trust, a real estate investment trust, or REIT, focused on medical office buildings.

A doctor gives a thumbs up.

IMAGE SOURCE: GETTY IMAGES.

The company's general strategy is to leverage its relationships with physicians and health systems to grow its portfolio of high-quality medical offices. Because of its relatively small size, it can focus on opportunities that may be too small for larger competitors, including off-market opportunities.

Even though it's small, Physicians Realty Trust is well diversified. Its 10 largest tenants make up just 28% of the portfolio, and none account for more than 5.5%. The company has relatively low leverage (30%), debt-to-EBITDA well below its peer group average, and a dividend well covered by its funds from operations. And the company's occupancy rate of well above 96% is among the best in the industry.

As far as future growth opportunities go, the medical office market should expand significantly over the coming years as the elderly U.S. population grows. In fact, the 65-and-up population is expected to roughly double by 50, which should create a steady stream of healthcare demand growth.

The best part is that you can get into the stock cheaply now, thanks to rising interest rates that are putting pressure on REIT prices. Physicians Realty Trust is trading close to its 52-week low and currently offers a dividend yield of more than 6%.

In a nutshell, Physicians Realty Trust has tremendous growth potential over the coming decades and will pay you nicely in the meantime.

A lot of room left to grow

Todd Campbell (Vertex Pharmaceuticals): Vertex Pharmaceuticals' profit grew remarkably last year, yet its cystic fibrosis drugs, Kalydeco and Orkambi, can only be used in fewer than half of all patients, and that suggests there's an opportunity to develop new treatments that drive sales and earnings even higher.

Last year, total cystic fibrosis sales surged 29% to $2.17 billion and EPS skyrocketed 129% to $1.95. This year, sales and profit are expected to increase even more now that the FDA's approved its third cystic fibrosis drug, Symdeko, a combination drug comprising Kalydeco and a new drug, tezacaftor.

Symdeko addresses a similar patient population as Orkambi. However, it has an arguably better safety profile that could allow it even more widespread use.

Symdeko's potential to expand the company's addressable market has management forecasting that revenue will increase to between $2.65 billion to $2.80 billion in 2018, up about 10% from 2017. Management hasn't disclosed an earnings target yet, but industry watchers think operating margin will improve because of sales growth, allowing the company to earn $3.02 per share this year, up 55% from 2017.

Vertex Pharmaceuticals' drugs can now address between 34,000 and 44,000 of the 75,000 patients with cystic fibrosis, but perhaps more importantly, Symdeko's approval gives Vertex Pharmaceuticals a platform on which it can build more therapies to treat almost all cystic fibrosis patients someday. Plans are to begin late-stage studies of triplet drug therapies this year, and if those trials succeed, Vertex Pharmaceuticals could one day help 90% of patients. Given that potential, I think it's only early days for this company.

A smiling boy sitting on a couch holding a video game controller with his fist raised in the air.

IMAGE SOURCE: GETTY IMAGES.

Creating growth out of thin air

Travis Hoium (Activision Blizzard): No company has had success in video games quite like Activision Blizzard. The company was an early adopter of digital purchases through its Warcraft game and has expanded through acquisitions, like King Digital, to dominate games in everything from consoles to PCs to mobile. But what gets me excited about Activision Blizzard's growth is new revenue platforms. 

The biggest growth opportunity could be esports, which is essentially just people watching other people play video games. That may sound crazy, but Overwatch League launched in January and had 10 million unique visitors in its first week of play, with an average of 280,000 people at any given moment. That's incredible engagement for any content, especially an esports league that popped up out of nowhere. 

Engagement in esports highlights the next growth opportunity, which is advertising. Brands such as T-Mobile, Sour Patch Kids, Intel, HP, and Toyota have already signed up to be advertising partners in Overwatch League, and Activision Blizzard will start advertising in-game in 2018 as well. Advertising revenue could drive a new wave of growth on existing customer engagement. 

Shares of Activision Blizzard aren't cheap at 31 times 2018 earnings guidance, but the company has a long history of beating guidance and growing into new markets. With new platforms like esports and advertising to leverage its growing customer engagement, this is a company that I think can grow for years to come.

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Stocks Mentioned

Activision Blizzard, Inc. Stock Quote
Activision Blizzard, Inc.
ATVI
$77.16 (-1.09%) $0.85
Vertex Pharmaceuticals Incorporated Stock Quote
Vertex Pharmaceuticals Incorporated
VRTX
$276.17 (-3.88%) $-11.15
Physicians Realty Trust Stock Quote
Physicians Realty Trust
DOC
$17.50 (0.23%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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