In this video, Chuck Carnevale examines 20 fast-growing businesses that appear reasonably or attractively valued, focusing on the GARP principle—Growth at a Reasonable Price. The central message is that investors shouldn’t simply look for great companies; they should look for great businesses at sensible valuations. Chuck repeatedly emphasizes that these stocks were screened, not thoroughly researched, so investors must conduct their own due diligence before investing.
Chuck begins by explaining his philosophy that it is a “market of stocks, not a stock market.” Individual companies have different characteristics, risks, growth rates, income potential, and valuations. Investors should therefore select businesses that fit their own goals, time horizon, and tolerance for volatility. Growth stocks can provide greater wealth-building potential, but that higher potential generally comes with greater risk.
For this screen, Chuck looked primarily for companies that produced 15% or better historical earnings growth over approximately 10 years, while also having double-digit expected future earnings growth. He eliminated several candidates that appeared excessively cyclical or had operating histories he considered too inconsistent.
Using FAST Graphs, Chuck walks through companies including Adobe, Allison Transmission, Apollo Global Management, CNX Resources, Salesforce, Deckers Outdoor, Five9, GoDaddy, Stifel Financial, TD SYNNEX, SS&C Technologies and Seagate Technology, among others. Rather than simply presenting them as recommendations, he uses each company to demonstrate how investors can evaluate historical earnings growth, forecasted earnings, P/E ratios, debt levels, credit quality, dividends, cash flow and margins of safety.
A recurring lesson is that a great business can still be a terrible investment if purchased at an excessive valuation. Five9 provides a striking example: despite strong earnings growth, investors purchasing at extremely high P/E multiples could have suffered enormous losses as valuation eventually reverted toward more reasonable levels. Conversely, an undervalued business with strong future earnings growth can potentially produce returns substantially greater than its underlying growth rate.
Chuck also stresses that historical numbers must be viewed in context. Changing the time period can dramatically change calculated growth rates and normal P/E ratios. Ultimately, investors invest in the future, so analyst forecasts, estimate revisions and the likelihood that future growth actually materializes deserve particular attention.
The overall takeaway is that these 20 companies represent potential opportunities for investors seeking aggressive wealth growth over the next 5, 10, 15 or 20 years, but they carry more risk than traditional blue-chip dividend stocks. Chuck closes by reinforcing his core philosophy: all investing is value investing. Value investing is not simply a category of stocks—it is the principle of buying a business at or below a reasonable estimate of its intrinsic value.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
