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. Motley Fool Stock Advisor pick Amazon.com
But for all their beauty, growth stocks are also Wall Street's prima donnas. 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 certainly in order when you enter the world of growth investing.
Fortunately, the Motley Fool's CAPS service brings us the collective intelligence of a community of more than 125,000 investors. It's 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. (If you like, run the screen for yourself.) Let's meet this week's contestants.
Chipotle Mexican Grill
Since being spun off from McDonald's, this purveyor of fresh Mex has been on a tear. Chipotle
Along with its competitors, Chevron's
Don't let the word "bank" in the name throw you off, Bankrate
Gaming giant MGM
Pharmacy benefit managers like Medco Health Solutions
The envelope, please ...
CAPS community members have shared their opinions, and the votes are in. Right off the bat, CAPS members kicked Bankrate and MGM out of the running by saddling them with two-star ratings. CAPS members generally consider Bankrate's stock too expensive, while some members have also raised questions about the sustainability of its business model. MGM, meanwhile, was panned because of an expected loss of business in 2009, as consumers tighten their purse strings. While Chipotle carries a slightly better three-star rating, CAPS members see the same consumer cutbacks hitting its bottom line, dragging the stock down.
So who goes down in a final showdown between Chevron and Medco Health Solutions? Though Chevron put up a good fight, its four-star rating just wasn't enough to beat out Medco's perfect five stars. There are a lot of strong arguments in favor of Medco, but CAPS All-Star and self-described practicing doctor ikkyu2 recently chimed in with this:
In terms of market share, responsiveness to patients and physicians, and back end, I am beginning to feel strongly that Medco is best of breed. The major risk, I think, is regulatory risk - the current administration may decide to alter the face of American medicine, record-keeping, and/or prescription drug benefits in a way that doesn't benefit [Medco Health Solutions]. I am not the decider, but I think I tend to doubt this will come to pass. If anything, I suspect Medco's model will be a basis for the shape of drug dispensing to come, and so they'll probably be able to fit into whatever the new administration has in mind.
Now go vote!
Do you think that Medco Health 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.
Further CAPS Foolishness:
Wal-Mart Stores is a Motley Fool Inside Value recommendation. Bankrate and Chipotle Mexican Grill are Motley Fool Rule Breakers picks. Medco Health Solutions and Amazon.com are Motley Fool Stock Advisor selections. Try any of our Foolish newsletters today, free for 30 days. The Fool owns shares of Chipotle Mexican Grill.
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool's disclosure policy would surely win America's Next Top Disclosure Policy, but for some reason, there's no such contest.