Stock investors looking for growth stocks with big upside even as the broader growth group suffers should look carefully at three “premier,” outperforming companies that dominate their markets, as outlined in a recent Business Insider story. These companies are growing at above-average rates, and boast management teams with good track records of executing on their business plans, improving earnings, and returning wealth to shareholders.
These under-the-radar stocks include commercial real estate data firm CoStar Group Inc. (CSGP), which is up 75% year-to-date (YTD) through Monday close, IT services firm RingCentral Inc. (RNG), up 95%, and diabetes-treatment technology firm DexCom Inc. (DXCM), up 31%, according to several investors and analysts, including senior portfolio manager Ronald Zibelli at Invesco.
Zibelli, who outperformed during and since the 2008 financial crisis and runs the Invesco Oppenheimer Mid Cap Growth Fund, says his secret weapon in outperforming the market is using five to six key criteria to select a small group of stocks that will post gigantic gains. The fund manager has delivered a 16% annual return over the past decade and has beaten 92% of its peers this year by screening for what he calls “premier growth” companies.
First, Zibelli’s team looks for companies $20 billion or less in market value for small caps and $40 billion for mid-caps, with above average growth rates. After this “easy part” of the screening, the Invesco manager looks for companies that are leaders in their industries with strong and seasoned management teams. Especially important in high growth industries is a companies’ ability to ward off new competition. As for hedging against an economic downturn or broader geopolitical concerns, Zibelli favors companies with more exposure to the U.S. market versus foreign markets.
Zibelli likes Commercial real estate information company CoStar, thanks to its innovative platform, leading market position, and high growth profile. "In the last four years, their earnings per share has gone from $2 to $10, and the stock has been a fantastic performer. That's an example of the kind of compounder that is a long-term holding in our portfolio,” he said.
Diabetes treatment technology company Dexom is also a winner, given the company is a pioneer in its industry, leading a “revolution in the treatment of diabetes in the last several years.”
“This company is up tenfold since the end of 2012, while their revenues grew proportionally from $100 million to $1 billion,” added the fund manager.