3 Growth Stocks for Ambitious Investors

Markets Motley Fool

Ambitious investors know that buying companies that are built for growth is a great way to outperform the market over time. However, growth stocks tend to be riskier than average, so it's important for these investors to be highly selective about which stocks they choose to buy.

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Which growth stocks do we think are worthy of consideration? We asked that question to a team of Motley Fool investors and they picked Buckeye Partners, L.P. (NYSE: BPL)Weibo (NASDAQ: WB), and Align Technology (NASDAQ: ALGN).

Income and growth

Reuben Gregg Brewer (Buckeye Partners, L.P.): Most people wouldn't think of the midstream oil and gas business as a growth space. And perhaps it's not, in a typical sense. However, Buckeye Partners managed to grow its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from roughly $380 million to $1 billion between 2010 and 2016. It continued the uptrend right through the deep oil downturn that started in mid-2014, taking oil from over $100 a barrel to a low in the $30 range. (Oil has been hovering in the mid $40 space lately.)

It's fair to say that Buckeye's business grew nicely right through a deep energy downturn. That said, the unit price isn't likely to excite you, because all of the growth is in support of the partnership's generous 7.6% distribution yield. That distribution, by the way, has grown each and every year for 21 consecutive years. This deserves a closer look.

The units are only up around 23% over the past decade -- not very exciting. Add in the distribution, however, and the total return number comes in at 145%! That's a number that you might find more interesting.

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Buckeye's growth, meanwhile, has been driven by over $8 billion worth of acquisitions and internal growth projects. Along the way, it diversified its business, growing its international operations from basically nothing to nearly 45% of EBITDA. And it's not done yet.

The company recently completed a $1.15 billion acquisition of a 50% interest in a portfolio of 14 oil and gas terminals located around the world. The deal is expected to be immediately accretive to distributable cash flow. In other words, look for EBITDA and distribution growth to continue.

If you're ambitious enough to shift your view of growth just a little, you'll see that Buckeye is an opportunity that you might be missing.

A high-flying social-media company

Keith Noonan (Weibo): Shares of Chinese social media company Weibo are up more than 220% over the last three years, but ambitious investors on the hunt for growth might still want to give the stock a long look. That's true even after a recent notice from the Chinese government that Weibo would need to shut down its video and audio streaming content due to lack of a license and because of political content that violates some of the country's regulations.

This setback threatens the company's outlook because streaming video is one of its key growth avenues, but Weibo will likely be able to get the ban lifted after applying for the necessary license and implementing a more restrictive content policy -- just as Tencent Holding did when its WeChat messenger service faced similar challenges. Culling certain content probably won't have a big impact on Weibo's growth trajectory, as the platform is used more as a service for keeping up with celebrities, friends, and media happenings than a forum for political discussion. So long as the ban is lifted, Weibo's growth story likely will remain intact. 

The company's last quarter saw revenues increase 67% year over year on a 30% monthly active user increase (reaching 340 million) and a 71% improvement in advertising sales, while net income grew a whopping 561% over the prior-year period. Looking at full-year comparisons, net income increased roughly 210% from fiscal 2015 to fiscal 2016, and gained roughly 325% over corresponding trailing-12-month periods, so fantastic growth in its last quarter isn't just due to favorable points of comparison.

Weibo looks expensive trading at roughly 45 times forward earnings estimates, but earnings are expected to grow roughly 200% in fiscal 2017 and then roughly 58% in the subsequent annual period -- indicating it still has big growth potential.

An opportunity that should make you smile

Brian Feroldi (Align Technologies): Malocclusion, or the misalignment of teeth, is a very common dental problem that affects two out of every three Americans. Orthodontists have relied on metal braces to realign teeth for decades, but this solution has several drawbacks. For instance, once metal braces are in place, they can't be removed. This is inconvenient, and also places several dietary restrictions on users. What's more, the braces themselves are quite unattractive. Given these realities, it isn't hard to figure out why many patients skip treatment altogether.

These negatives have created a great market opportunity for Align Technology. The company pioneered an invisible-braces system that it calls "Invisalign." The product is a set of custom-made clear aligners that are placed directly on top of the teeth. Not only are these aligners nearly invisible to the naked eye, but they also work to slowly realign the patient's teeth over time. They can be removed at any time, which makes them easy to clean and eliminates dietary restrictions.

These advantages have helped Align's top line to soar for years as the company has steadily won market share. What's more, Align is highly profitable, so its earnings have been on the rise, as well. These factors have caused Align's share price to soar.

While Align's history is impressive, there's still ample reason to believe that its strong growth rates can continue. The company estimates that its current penetration rate is about 7% of its addressable market.

Given the advantages of Invisalign, I think there's ample reason to believe that this number will continue to move higher over time. If true, then I could easily see the stock's strong run continuing from here.

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Brian Feroldi has no position in any stocks mentioned. Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Align Technology. The Motley Fool recommends Weibo. The Motley Fool has a disclosure policy.