5 Super-Cheap Growth Stocks
Four weeks ago, I started what hopes to be a monthly tradition: publicly choosing one stock to add to my Roth IRA.
After paying down high-interest debt, building up an emergency savings fund, and maxing out any potential match your employer offers to your 401(k), you should absolutely be maxing out ($5,000 per year) your Roth IRA. Through this plan, any and all capital gains go untaxed when withdrawals begin in retirement.
But before jumping in and rashly choosing a stock, it's important to keep a watchlist of stocks that you're following. Here are five super-growth stocks that are on my watchlist. All five of these companies are significantly cheaper today than they have been at any point in the recent past.
Price Change Since Sept. 1
|Zipcar (NYS: ZIP)||(19.9%)|
|Travelzoo (NAS: TZOO)||(40.0%)|
|Netflix (NAS: NFLX)||(45.3%)|
|Solazyme (NAS: SZYM)||(32.2%)|
|Ancestry.com (NAS: ACOM)||(34.1%)|
Source: Google Finance. Prices as of market open, Sept. 23.
Zipcar was the inaugural stock in my Roth series last month, and today's prices represent an even better bargain today than they did back then. As Peter Lynch once said, "Sometimes the best stock to buy is the one you already own."
In addition to the attractive value point, Zipcar recently signed a deal with Ford (NYS: F) . As fellow Fool Molly McCluskey noted, "The Ford-Zipcar pact will run for two years, with Ford providing up to 1,000 sedans and SUVs, subsidizing the hourly rental rate for students who use their cars, and offering a discount for the first 100,000 new customers who sign up for Zipcar."
If you think the 40% haircut Travelzoo's investors have endured this month is bad, consider this: On April 25, the stock crossed above $100 per share; today, it sits at just $23.39.
And yet if you throw out a one-time charge to the state of Delaware, the company has improved earnings by 30% yea on year and continues to expand its Local Deals segment. In fact, its recent earnings miss is a reflection of expenses for its rapid Local Deals expansion rather than weakening momentum.
Oh, Netflix! How lucky you are that I loved roller coasters growing up. Though I may shy away from the rides now, it's only because I can get all the kicks I need from being one of your shareholders.
Despite the recent turmoil, I'm going to give Reed Hastings and his crew the benefit of the doubt for now. Transitioning from DVD-by-mail to streaming is no easy task. It's the type of dilemma that innovators must sometimes face, and if anyone is built to deal with it, it's Netflix.
This recent IPO, which produces standard and specialty oils through the use of proprietary micro-algae, has been hit hard lately. The company's story is everything you could ask for: green energy that relies on readily available feedstock that can, in the process, wean us off foreign oil.
I'll be the first to acknowledge that as oil prices fall, Solazyme's value proposition is less enticing for customers. But I don't think oil will be going down forever. And Solazyme already has partnerships in place that will provide a steady stream of revenue until the price of oil picks up again.
A cautious note to investors by analyst firm Wedge Partners recently sent Ancestry shares tumbling.
But for investors who might be questioning their purchases, fellow Fool Aimee Duffy offered up four reasons not to worry about the genealogy website. Among those reasons: international growth, popular marketing schemes, a product with emotional appeal, and a lack of competition.
But none of these made the final cut!
Though I believe that all five of these companies are attractively priced now, they didn't make the final cut for my Roth IRA this month. Stay tuned to find out which stock I did pick, which I'll detail Monday.
Until then, I suggest you dig into another attractively priced growth stock by taking a look at our brand new special free report, "The Hottest IPO of 2011." Inside, our analysts give you the scoop on a company that could yield returns similar to an investment in McDonald's circa 1971. The report is yours today, absolutely free!
At the time this article was published Fool contributor Brian Stoffel owns shares of Ancestry, Netflix, Travelzoo, and Zipcar. You can follow him on Twitter at @TMFStoffel. The Motley Fool owns shares of Solazyme, Zipcar, and Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor, Travelzoo, Netflix, McDonald's, Zipcar, and Ancestry.com, and have recommended creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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