Just before New Year's, a group of family and friends asked me to give them advice on building out the ideal growth portfolio. I split my picks into three groups based on risk: a core, tier one investments, and riskier tier two investments.
Not in my wildest dreams could I have predicted the type of success witnessed thus far. Below, I share with you how the hypothetical portfolio is doing, as well as offer up my three best buys from the group and two stocks I'd let cool off before adding more to my portfolio.
Read all the way to the end, and I'll also throw in access to a special free report about the best growth idea the Fool has right now.
|
Core |
||||
|---|---|---|---|---|
|
Company |
Allocation |
Jan. 1 Balance |
March 1 Balance |
Change |
| Intuitive Surgical | 11.5% | $115.00 | $129.49 | 12.6% |
| 11.5% | $115.00 | $110.86 | (3.6%) | |
| Amazon.com | 11.5% | $115.00 | $119.60 | 4.0% |
| Whole Foods | 11.5% | $115.00 | $136.05 | 18.3% |
|
Tier one |
||||
|
lululemon athletica |
7.5% | $75.25 | $114.30 | 51.9% |
| Apple | 7.5% | $75.25 | $101.06 | 34.3% |
| Westport Innovations | 7.5% | $75.25 | $96.85 | 28.7% |
|
IPG Photonics |
7.5% | $75.25 | $121.75 | 61.8% |
|
Tier two |
||||
|
Baidu |
5% | $50.00 | $59.60 | 19.2% |
| ZipCar | 5% | $50.00 | $49.40 | (1.2%) |
| Stratasys | 5% | $50.00 | $59.95 | 19.9% |
|
MAKO Surgical |
5% | $50.00 | $77.55 | 55.1% |
|
Solazyme |
5% | $50.00 | $56.95 | 13.9% |
| Total | 100% | $1,000.00 | $1,233.41 | 23.0% |
Source: Google Finance. Accurate as of market close March 1.
Of course, dividing $1,000 across a portfolio this size isn't realistic. But it serves as an easy-to-digest proxy for how the portfolio has fared through the first two months of the year.
And a 23% return against a market return of just under 10% is amazing for such a short time. But if you weren't able to get in at the beginning of the year, here are my top three picks from these stocks right now, and two to wait for before buying.
Best buys
MAKO Surgical -- which produces the RIO system surgical machine to perform knee and hip replacement surgeries -- reports earnings next week. Analysts expect MAKO to turn in a loss of $0.14 per share. The company's long history of failing to produce profit has led to one-third of shares being sold short. I think that with the company's growing base of installed RIO systems, and expanding margins the company sports, the shorts could be in for a world of hurt -- and I'm not the only one who thinks that.
Chinese search engine giant Baidu is another company that I think could be a great buy at today's prices. Yes, the company currently trades for about 47 times earnings, but consider what we know: Revenue increased 83% last quarter, net margins have expanded to 45%, and even though there are 500 million Internet users in China today, that represents less than half of the population. Throw in plans to monetize mobile advertising and the fact that the company is looking beyond China, and you can see why this stock might be worth the high valuation.
Finally, I'm a big believer in biofuel specialist Solazyme. I actually just wrote a lengthier piece on why I believe this, so I'll give the short version. The company is meeting all of its stated goals and has three different avenues for future success: health products, beauty products, and biofuels.
Let these two cool off
Though I'm not suggesting selling IPG Photonics or Lululemon, I'll be waiting a bit before adding more shares. IPG just announced a secondary offering on the open market. The move has me scratching my head, as IPG has more than $200 million in cash and short-term investments. If the move were to help meet enormous demand, however, it would be a great move. I need to do a little more research before diving in here.
As for Lululemon, I'm opting to wait until the company comes out with earnings later this month. With today's analyst upgrade boosting the stock, I want to see numbers that convince me the yoga retailer will continue to live up to the Street's lofty expectations.
Our chief rule-breaker's favorite
We have a name for the type of investing that I'm practicing here: rule-breaking -- or investing in innovative companies that are changing our world. Recently, Fool co-founder and chief rule-breaker David Gardner sat down to ponder which stock, out of them all, holds the most promise over the coming years.
You can find out which company he picked by reading our latest report: "Discover the Next Rule-Breaking Multibagger." I'll give you a hint and tell you that the stock is actually in the portfolio I revealed above. But to find out which one it is, you'll have to get your copy today. It's absolutely free!
