and a still-slow
have created a real conundrum. Should you focus on the increasingly
smaller group of deep-value stocks, or should you step on the gas,
searching for stocks that are set for very strong
growth in the years to come?
If you fall into the latter camp, then I've pulled together a great
list to start your research. I've found 20 stocks that are poised
earnings per share (
by at least 40% in 2012 and by at least another 40% in 2013.
stocks from the list. Who knows where oil, gas, copper or steel
prices will be a year from now? If the underlying commodities fall
in value, then there's no way these kinds of stocks can boost
profits sharply in 2013.
I've also sorted out housing stocks from the group and put them in
the table below. These stocks may boost profits sharply in coming
years -- if the housing market picks up. And that's still a big
On the bigger table later in this piece, you'll alsospot
. Each of these firms is in the timber business and would surely
benefit in the eventual upturn in new home construction.
I also sorted out technology stocks from the group. These companies
are hoping for strong demand in 2012 and 2013, as IT budgets
continue to slowly open up. Many corporate networks, along with
global telecom networks, are being upgraded with the fastest chips
and switches, which may be a boon for these companies, as you can
see in the table below...
It's hard to
a clear theme in the remaining stocks in this group. Profits are
expected to rise at a fast pace on the heels of market-share gains,
rebounding industry demand or
that is yielding
A pair of stocks book-ending this table are also members of my
$100,000 Real-Money Portfolio
Sign up here
-- free for a limited time).
appear set for solid top and bottom-line growth, though investors
should brace for bumpy quarterly results on the path to firmer
annual results. [Go
to view my original take on these stocks.]
You'll also spot
Fuel Systems (Nasdaq:
on the list. Though the stock is up 33%
since I recommended it
three weeks ago, it still has a lot more upside if natural
gas-focused legislation is enacted this year.
This company finds itself right in the middle a major national
debate about our nation's academic standards and costs. The current
education system has been characterized by high costs and poor test
scores, which is why former President George W. Bush and President
Obama have sought to shake things up through new systems of rewards
and penalties to boost academic results.
K12 appears to be something of a solution to the problem. The
company has developed an academic curriculum -- taught for
home-schooling and charter schools -- that costs roughly 30%-40%
less per student to administer than traditional public K-12
classrooms. It's not simply a path to cost-cutting: "Evidence
suggests, year after year, virtual schools using the K12 curriculum
continue to outperform on state test results, academic performance
improves with tenure and more students are being accepted to
top-tier colleges like Cornell, Princeton, Berkeley, Stanford,
Michigan and Duke," note analysts at Barrington Research.
Parents and educators are surely taking note of K12's impressive
results and costs. Enrollment surged 46% in the December quarter to
144,000 students compared with a year earlier. Revenue is expected
to rise from $522 million in 2011 to nearly $700 million this year
and more than $800 million by 2013. That's leading to robust profit
gains as well, as noted in the table above.
took a big hit in mid-December when
The New York Times
questioned the merits of the company's
, citing concerns that the for-profit approach has undermined the
quality of education. This has not led to any further scrutiny of
the company's business model thus far, but there is a risk that
legislators will eventually examine the company's claims of
superior testing scores.
That concern aside, Merrill Lynch says the company has "significant
top-line growth potential without taking into account expansion
into new states." Their $30
is roughly 40% above current levels. Barrington Research's analysts
, predicting shares could rise to $35, noting that at less than
nine times projected 2012
, shares trade at a discount to similar stocks, despite the fact
that K12 has superior projected growth rates.
Risks to Consider:
These are all high-growth business models carrying high
expectations. A weak quarter could cause shares to tumble.
Action to Take -->
When searching for growth stocks, it's best to focus on companies
with an extended runway, capable of several years of sustained
growth. Many companies in the tables above appear to fit that bill
and should be a fertile ground for further research into potential
You can also follow along with my
$100,000 Real-Money Portfolio
trades free for a limited time.
Simply click on this link to sign up
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of ZIP, CREE in one or more if its "real money"
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