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 gorgeousness, growth stocks are also the
prima donnasof 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
certainly in order when you enter the world of growth
investing.
Fortunately,
The
Motley Fool's CAPS servicebrings us the collective
intelligence of more than 140,000 investors, making it a
great resource for separating
the Jessica Albasfrom 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 15%
or more per year over the past three years. (You can
run the screenfor yourself). Let's go ahead and meet our
contestants.
Netflix
The doubling of earnings per share that
Netflix (Nasdaq: NFLX) delivered between 2005
and 2008 is no joke. Nor is the near-50% jump over the past
12 months.
How did the company do this? Easy: It invented DVD rental
through the mail. Despite the subsequent arrival of
competitors such as
Blockbuster , Netflix now claims 9.4 million
of the estimated 12 million DVD-through-the-mail
subscribers.
Not only has this nascent industry shown continued strong
growth, but the new twist of offering movie rentals via the
Internet could also help Netflix keep up a significant growth
pace.
Buckle
Denim has been at the heart of many very successful
retailers, including
Gap (NYSE: GPS) and Levi Strauss. The same
goes for
Buckle (NYSE: BKE), where denim sales make up
more than 40% of the company's revenue.
Buckle sells trendy clothing to the 15-to-27-year-old
crowd through nearly 400 retail stores. More than 70% of the
company's sales come from brand names such as Hurley,
Fossil , and Ed Hardy.
Growth has picked up significantly for the company in
recent years; the top line has shown some life, and margins
have expanded significantly. Over the past year, Buckle's
revenue has jumped more than 20%.
PotashCorp
It's hard
notto show significant growth when you're a
commodity producer, and the price of your commodity of choice
goes through the roof.
Like major competitor
Mosaic (NYSE: MOS),
PotashCorp (NYSE: POT) sells crop nutrients
-- including, not surprisingly, potash. And potash has been
the big story for this Saskatchewan fertilizer producer.
World demand for potash spiked as China stepped up its
agricultural demands and ethanol became a hot topic. In
response, potash prices skyrocketed.
For the quarter ended in June, PotashCorp actually saw its
average selling price per ton of potash
increase15%. That doesn't mean demand has kept up.
Total potash sales for the quarter fell more than 80% from
the prior year. Will demand return? Let's hope so --
PotashCorp's future growth depends on it.
Coach
I know what you're thinking. Strapped consumers and
slow economic growth make it crazy even to think about a
fancy-purse slinger like
Coach (NYSE: COH). You might be
surprised.
There's no doubt that the near-100% growth in Coach's
revenue between 2005 and 2008 was interrupted by the
recession. For the company's fiscal year 2009 -- which ended
in June -- total sales crept up just 2%, and net income
(excluding "unusual items") fell 16%. The strength in the top
line, however, speaks to the power of Coach's brand.
With foreign countries including China representing a
significant part of Coach's strategy, continued growth could
be back in the bag in relatively short order.
Public Service Enterprise Group
The epitome of boring,
PSEG (NYSE: PEG) is a utility company
offering electric power and natural gas to customers in the
Northeast and mid-Atlantic. Boring or not, though, investors
watched the company's net income jump nearly 80% between 2005
and 2008. Continued... |