Growth Picks Beat the Market
After a slow start, our seven stocks roared to the finish line.
A year ago we thought large-company growth stocks were poised to make their long-awaited comeback (Stocks for the Times, March 2006). Overall, shares of big growth companies trailed the market last year, but our seven picks performed admirably. They rose an average of 14% (not including dividends) to January 16, beating the gain of Standard & Poor's 500-stock index by three percentage points.
There were two big winners. Kohl's (KSS) proved that there's still life in department stores by rising 48%. The Wisconsin-based chain has big expansion plans for 2007, so we'd hang on to it. We'd also hang on to International Game Technology (IGT), which climbed 51%. The gaming-equipment sector is consolidating, and IGT, which has been an active acquirer, should come out a winner.
Two moderate losers were Carnival Cruise Lines (CCL), off 9%, and Fastenal (FAST), which sells nuts, bolts and other construction supplies, down 6%. We still think demographic trends (that is, leisure-loving baby-boomers) will boost Carnival in the long run. Fastenal's stock was hampered by the home-building slowdown, but its successful expansion program is still on track.
In the middle of the pack were software maker Adobe (ADBE; up 3%), health insurer WellPoint (WLP; up 4%) and audio-equipment supplier Harman International (HAR; up 4%). If you own any of these stocks, hold on to your shares.