3 Disruptive Growth Stocks to Buy Now

By Motley Fool StaffFool.com

Innovation and disruption can be powerful growth drivers for companies in any sector. With this in mind, we asked three of our top contributors to share with us their most promising investment alternatives in disruptive growth stocks for the new year --Netflix , LinkedIn , and Workday .

Andrs Cardenal(Netflix): The TV industry is changing radically with the growing popularity of online video streaming. Netflix is the major driving force behind this change and arguably the biggest beneficiary from the streaming revolution. From the company's Long Term View:

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The company has more than 53 million global members as of the the third quarter, and it added 3 million subscribers during that period. These substantial figures clearly indicate that Netflix is beyond the inflection point when it comes to consumer demand and serve as proof that it offers an attractive option to consumers.

Source: Netflix

Not only is Netflix growing at a remarkable speed, the company is also increasing profitability. Contribution margin in the U.S. was 28.6% during the last quarter, a big increase versus 23.7% in the third quarter of 2013. Management plans to achieve a contribution margin of 30% in the U.S. next year, and it intends to increase margins by 200 basis points per year after that. Also, international markets launched more than a year ago are already profitable on a contribution basis, so Netflix is producing rising profitability both at home and abroad.

The TV business is changing, and Netflix is leading the charge while delivering exciting growth and profitability for investors.

Joe Tenebruso(LinkedIn): I like to invest in companies that lead the world forward. LinkedIn, with its mission to "create economic opportunity for every member of the global workforce," certainly fits that description. With a user base of more than 300 million members in more than 200 countries and territories, LinkedIn is the world's largest professional network.

This network connects people around the world with career opportunities, while also uniting thousands of employers with the talent they need to run their organizations -- amulti-sided platform. And thanks to the powerful network effects that such a model enjoys -- LinkedIn stands to grow significantly in the years ahead.

Source: LinkedIn

Beyond its impressive user base, it is important to note how LinkedIn is disrupting the entire professional recruiting industry. As my colleague Tim Beyers explains:

LinkedIn eliminates a fair amount of the guesswork that comes with hiring new workers. Managers can see not only what you say about yourself but also what others say about you, who's connected to you, which companies you follow, which skills you claim, which skills you've proven, and best of all, what you think. Your posts become a window into your mind as a potential employee.

Matched with such a large network, this treasure trove of data is allowing LinkedIn to fundamentally change the way professionals and employers connect with each other, recruit talent, and more. As the company nurtures these relationships around the world, I believe it will also create substantial profit opportunities for long-term investors.

(Workday): Most people view Workday as just another software company, one that provides its services through the cloud. But in reality, Workday is much more of an ecosystem, like iOS for Apple, that focuses on human resources management (HRM) -- a massive market that Pacific Crest figures will grow from $50 billion in 2013 to $70 billion by 2015.

What makes Workday a disruptive force is the manner in which it has expanded to become a one-stop shop for all of the HR-related needs of its enterprise clients. Back in Workday's infancy, the platform worked well for basic task such as storing employee information and managing payroll. It has since evolved to utilize the data to help clients review applications, evaluate talent,hire more effectively, and offer competitive pay.

Source: Workday

Now, businesses of any size can hire Workday and then access its cloud platform for all HR funcitons. This effectively eliminates the need for any older software that a client might have used for payroll, employee information, recruitment, and training. In many cases, a company can reduce the complexity of using multiple services by replacing them all with a comprehensive solution from Workday.

The result of this disruption? Workday attracted more than 600 customers by the end of last year leading to significant revenue growth. During Workday's last quarter it grew revenue 68% year-over-year to $215 million and reported an additional $510 million of future business that has yet to be reported as revenue.

Besides the company's compelling services, top line growth, and large target market, Workday has shown the ability to continuously improve its software with attractive new services. The stock looks like a great long-term investment opportunity. Its $15.5 billion market capitalization may seem pricey right now, but if Workday can keep growing its HRM market share long-term, then the company has plenty of room to run.

The article 3 Disruptive Growth Stocks to Buy Now originally appeared on Fool.com.

Andrs Cardenal owns shares of Apple, LinkedIn, and Netflix. Brian Nichols owns shares of Apple. Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Apple, LinkedIn, and Netflix. The Motley Fool owns shares of Apple, LinkedIn, and 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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