"The World's Greatest Growth Portfolio" Continues to Outperform
Every year, I set out to find the most innovative companies with lasting competitive advantages, and put them into "The World's Greatest Growth Portfolio."
If, since this portfolio began in January 2012, you had invested $100,000 in the S&P 500, you would be sitting on a gain of $26,800 -- not including dividends. But if you would have invested along with me in this growth portfolio, your gains would be quite a bit higher, at $31,500.
Since inception, this portfolio has returned 31.5%, beating the S&P 500 by 4.7 percentage points. Read on to see what happened this month to account the portfolio's winning ways, and click on any company to see the original buy recommendation.
Jan. 1 Balance
Source: Google Finance. Prices accurate as of Monday, April 29, 2013.
Here are the five companies that were making headlines this month from the portfolio.
Barring a major product development by the end of the year, I'm thinking that Apple will find itself out of this portfolio in 2014. It's not that the company isn't still quality, or selling for really cheap. Rather, its because I'm slowly becoming convinced that Steve Jobs represented the sustainable competitive advantage to Apple's innovation dominance.
I'll concede that the Apple ecosystem will do a lot to protect Apple's brand moving forward. But this growth portfolio is specifically for innovation. With its focus on capital return, Apple seems to be more focused on being an income play than an innovation one.
The market clearly wasn't impressed with what Baidu had to offer in its earnings report. But I saw three nuggets that make me believe China's largest search engine still has its best days in front of it. Among those reasons:
- The company is investing in where it counts, especially in mobile.
- Its earnings miss eased my crazy-China-fraud fears that numbers were being massaged by management.
- Baidu continues to add new online marketing partners at a healthy clip.
I really can't complain that the market knocked Amazon down a bit after earnings. The company, after all, has been sacrificing short-term profits for long-term dominance for some time now.
In fact, since profit started to dip starting in 2011, the stock is actually up more than 40%. That's because revenue has ballooned, up almost 80% between 2010 and 2012. Eventually, Amazon will ease up on its fulfillment center and technology spending -- at least as a percentage of revenues -- and when that day comes, both free cash flow and earnings should increase considerably.
Next up is the world's largest coffee chain. Starbucks also released earnings in April, and while not being the knock-your-socks-off variety, it was very solid.
Over the long run, Starbucks probably has good days ahead of it. It has a top-notch CEO, combined with smart acquisitions domestically that could make it a player in food as well as caffeinated beverages, and the opportunities in China and even India represent huge runways for growth.
Finally we have the predominantly female-centered athletic retailer, Lululemon. Though the company didn't come out with earnings during April, its stock was up almost 20%. That largely has to do with the company's taking responsibility for its product recall of too-sheer yoga pants. But with the chief product officer leaving the company, and analysts saying the fallout won't be that bad, investor fears were eased.
Keep your eyes open
Later this week, I'll be revealing the three top buys from this group. But in the meantime, I suggest you read up on Baidu. The company is following a similar evolution to what Google went through, and it's important that you understand what that means. Our brand-new premium report breaks down the dominant Chinese search provider's strengths and weaknesses. Just click here to access it now.
The article "The World's Greatest Growth Portfolio" Continues to Outperform originally appeared on Fool.com.Fool contributor Brian Stoffel owns shares of Apple, Google, Amazon.com, LinkedIn, Starbucks, Baidu, Whole Foods Market, lululemon athletica, Intuitive Surgical, Westport Innovations, Stratasys, and IPG Photonics. The Motley Fool recommends 3D Systems, Amazon.com, Apple, Baidu, Google, Intuitive Surgical, IPG Photonics, LinkedIn, lululemon athletica, Starbucks, Stratasys, Westport Innovations, and Whole Foods Market; owns shares of 3D Systems, Amazon.com, Apple, Baidu, Google, Intuitive Surgical, IPG Photonics, LinkedIn, Starbucks, Stratasys, Westport Innovations, and Whole Foods Market; and has options on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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