3 Stocks That Could Put Tesla's Returns to Shame

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Tesla stock has absolutely crushed the market over the last five years, with shares up more than 900% over the stretch thanks to mounting confidence that the company's battery technology will revolutionize the automotive market and other industries. That's a fantastic return on investment, but there are also stocks you can buy today that will produce even greater gains. The hard part is identifying them.

With that in mind, we asked three Motley Fool investors to profile a company that has a long runway for growth. Here's why they think Winnebago Industries (NYSE: WGO), Bed Bath & Beyond (NASDAQ: BBBY), and Baozun (NASDAQ: BZUN) have the potential to surpass Tesla's enviable performance.

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Go retro with a Winnebago

Demitri Kalogeropoulos (Winnebago): It doesn't come with anything close to the futuristic vibe of a Tesla investment, but Winnebago stock has actually outperformed the high-tech upstart by a wide margin over the past three years.

There are good reasons to expect that performance gap to continue, too. The recreational vehicle industry is in its ninth consecutive year of expansion, after all, and that growth disproportionately helps the leading brand in the niche. But Winnebago has generated its own good luck, too, including by acquiring rival Grand Designs in late 2016. This purchase not only filled out the RV giant's portfolio, but it tilted its offerings toward the profitable, lower-priced towables that are in such high demand right now. As a result, sales spiked 83% in the most recent quarter even as gross margin expanded.

Winnebago needs to innovate if it wants to keep outgrowing the market. And management is aiming to ramp up its production capacity over the next few years, just like Tesla hopes to do. But the design and engineering feats it needs to deliver aren't nearly as ambitious, or risky, as Tesla's, so investors have a better idea of what they're getting into with this stock. Sure, it would be ironic for a 1960s brand to trounce one of the most innovative businesses around. But it wouldn't be the first time an established, steady company beats a volatile disruptor over the long term.

Rock-bottom expectations

Tim Green (Bed Bath & Beyond): Retailer Bed Bath & Beyond is struggling. Comparable sales are slumping, and profits have been in decline for the past five years. Over the past 12 months, Bed Bath & Beyond produced $500 million of net income, down from $1.04 billion in fiscal 2013.

Clearly, whatever Bed Bath & Beyond is doing is not working. The company's may never be able to produce double-digit operating margins may again, because of pressure from online retail. But that doesn't mean the stock can't produce solid returns for investors. Shares have tumbled over the past three years, down about 70% in that time, and down 46% in 2017 alone. At the current stock price, Bed Bath & Beyond trades for about 6.5 times trailing-12-month earnings.

That valuation bakes in disaster. It's certainly possible that earnings will continue to tumble. But if the market is being overly pessimistic here, and Bed Bath & Beyond manages to stabilize its business, the stock won't be trading at such a depressed valuation for long.

Bed Bath & Beyond was a best-of-breed retailer as recently as 2013. It needs to figure out how to return to growth in a world where consumers are increasingly buying stuff online. I don't know whether it will succeed. But if it does, the stock will be worth a lot more than it's trading for today.

Ride momentum in Chinese e-commerce

Keith Noonan (Baozun): When you're searching for stocks that are capable of delivering explosive growth, focusing on companies with highly scalable businesses at the intersection of multiple favorable trends is a strategy that will increase your chances of success. Baozun fits the bill. The Chinese company's core business revolves around providing clients with all-purpose e-commerce platforms that are easy to deploy and maintain -- a service that's on track to see a big increase in demand, and one that could power the company's stock to tremendous gains.

S&P Global Ratings estimates that Chinese e-commerce spending will increase at an average annual rate between 20% and 25% over the next two years. There's big room for growth beyond that window as well. At present, about 40% of China's population has yet to connect to the internet. The number of connected users is only going to increase in coming years, adding even more momentum for online retail. Growth of the country's middle class will also likely result in more small-business formation and an increase in discretionary spending.

It's difficult to imagine a scenario in which the growth of e-commerce is disrupted. Notably, Baozun's early leadership in its niche and partnership with Alibaba (China's largest online retailer) stand a good chance of helping it scale up its business and generate impressive stock returns along the way. Priced at roughly 33 times forward earnings estimates, Baozun has the makings of a stock that can dramatically surpass the market's expectations.

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*Stock Advisor returns as of January 2, 2018

Demitrios Kalogeropoulos owns shares of Tesla. Keith Noonan has no position in any of the stocks mentioned. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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