Michael Kantrowitz, CFA
Michael Kantrowitz, CFA, chief investment strategist at Cornerstone Macro, which provides equity research for institutional investors, New York City. CornerstoneMacro.com
In a struggling economy, like the current one, companies that continue to grow their revenue and profits significantly are highly prized by investors. But real fast-growth stocks are relatively rare. Although about 280 stocks in the S&P 500 are classified as “growth,” as opposed to bargain priced “value” stocks, only 66 are truly worthy of that designation, having increased revenue an average of 15% or more over the past five years.
Preeminent among them are some of the biggest tech names—Amazon.com, Facebook, Google parent Alphabet and Microsoft, which have driven much of the stock market gains this year.
Over the past five years, cumulative gain for the real growth stocks through October 12 were 195% versus 118% for the overall S&P 500 Growth index and 75% for the overall S&P 500 index.
Because the economic recovery is likely to remain slow, the real growth stocks should remain attractive. You can see the full list of 66 at BottomLineInc.com/66GrowthStocks. Overall, these companies have significantly higher valuations and higher volatility than the S&P 500, but their share prices are likely to keep rising because investors looking for robust growth have so few choices.
In addition to the big tech names, the real growth stocks, whose performance has trounced the S&P 500’s returns this year, include less prominent companies such as medical device maker Abiomed…semiconductor manufacturer Broadcom…cable-TV and Internet giant Charter Communications…diabetes-testing company DexCom…software service providers Paycom Software and ServiceNow…and cystic-fibrosis drug maker Vertex Pharmaceuticals.
