Motley Fool’s 5 High Growth Stock Picks

In this article, we discuss Motley Fool’s 5 high growth stock picks. If you want to see more stocks in this selection, check out Motley Fool’s High Growth Stock Picks. 

5. Paycom Software, Inc. (NYSE:PAYC)

3-year Revenue Growth: 63.4%

Paycom Software, Inc. (NYSE:PAYC) was founded in 1998 and is headquartered in Oklahoma City, Oklahoma. The company provides cloud-based human capital management (HCM) solutions for small to mid-sized companies in the United States. In Q4 2022, Motley Fool Asset Management reported owning 48,442 shares of Paycom Software, Inc. (NYSE:PAYC) worth $9.4 million, representing 1.06% of the total securities. 

On February 7, Paycom Software, Inc. (NYSE:PAYC) reported a Q4 non-GAAP EPS of $1.73 and a revenue of $370.6 million, outperforming Wall Street estimates by $0.24 and $3.89 million, respectively. Revenue over the period climbed 30% on a year-over-year basis. 

Arvind Ramnani, an analyst at Piper Sandler, increased the firm’s price target on Paycom Software, Inc. (NYSE:PAYC) from $395 to $417 and maintained an Overweight rating on the shares on February 8. According to the analyst’s research note, Paycom Software, Inc. (NYSE:PAYC) reported a slight increase in revenue and a significant EBITDA beat.

According to Insider Monkey’s Q4 data, Paycom Software, Inc. (NYSE:PAYC) was part of 47 hedge fund portfolios, compared to 54 in the prior quarter. Greg Poole’s Echo Street Capital Management held the leading position in the company, with 579,952 shares worth nearly $180 million. 

Polen Global SMID Company Growth Strategy made the following comment about Paycom Software, Inc. (NYSE:PAYC) in its Q4 2022 investor letter:

“Paycom Software, Inc. (NYSE:PAYC), a high quality, high-growth leader in human capital management and payroll software, was the largest single detractor from returns over the quarter, reversing some of the gains it made in Q3. The company posted strong third-quarter results, with revenue and earnings ahead of expectations. However, concerns over a Global recession and a weaker US employment market weighed heavily on the share price. The company continues to take market share from long-standing incumbents. We believe the business has a long runway with only approximately 5% market share and a growing total addressable market.”

4. Tyler Technologies, Inc. (NYSE:TYL)

3-year Revenue Growth: 65.6%

Tyler Technologies, Inc. (NYSE:TYL) is a Texas-based provider of integrated information management solutions and services for the public sector. Motley Fool Asset Management held 24,800 shares of Tyler Technologies, Inc. (NYSE:TYL) in the fourth quarter of 2022, worth approximately $8 million. It is one of the high growth stock picks of Motley Fool. On March 1, Tyler Technologies, Inc. (NYSE:TYL) announced that it has acquired Safeground Analytics, a company specializing in real estate appraisals and assessments for states, counties, and municipalities.

On February 17, Tyler Technologies, Inc. (NYSE:TYL) had its price target reduced by Credit Suisse from $375 to $370 and the firm’s rating on the shares remains Neutral. The company’s financial results were lower than expected, primarily due to the increased adoption of Software as a Service, leading to a significant decrease in revenue from software licenses, and the continued growth of subscriptions, as per Credit Suisse. 

According to Insider Monkey’s data, 40 hedge funds were bullish on Tyler Technologies, Inc. (NYSE:TYL) at the end of December 2022, compared to 41 funds in the prior quarter. Greg Poole’s Echo Street Capital Management is the largest stakeholder of the company, with 543,880 shares worth $175.3 million. 

Andvari Associates made the following comment about Tyler Technologies, Inc. (NYSE:TYL) in its Q4 2022 investor letter:

“Tyler Technologies, Inc. (NYSE:TYL) is the only public company focused on software for state and local governments in North America. Since 1998, Tyler has acquired over 40 software companies. Annual revenues have grown from $50 million in 1998 to now over $1.8 billion while cash flows and profits have grown at a faster rate.

Tyler has few competitors that can match its offerings and service levels. Large, potential competitors stay away from Tyler’s market because the sales cycle is measured in years and products require too much customization. Once Tyler wins a client, they usually stick around for decades. Client retention for Tyler is nearly 100%, which gives them highly predictable revenues. Also, Tyler management has a record of effective capital allocation. Finally, Tyler has the wind at its back as local governments continually upgrade decades-old systems. Tyler will steadily increase its market from the low-teens into the 20s and 30s over the next decade.”

3. Atlassian Corporation (NASDAQ:TEAM)

3-year Revenue Growth: 73.6%

Atlassian Corporation (NASDAQ:TEAM) was founded in 2002 and is headquartered in Sydney, Australia. The company designs, develops, and licenses software products worldwide. Its products include Jira Software, Jira Work Management, Jira Service Management, Jira Align, Opsgenie, Confluence, Trello, Bitbucket, Bamboo, Crowd, Crucible, Fisheye, Halp, Sourcetree, and Statuspage. Atlassian Corporation (NASDAQ:TEAM) was a new arrival in Motley Fool’s Q4 portfolio, with the hedge fund acquiring 79,368 shares worth $10.2 million. 

The company beat its top and bottom line estimates on FQ2 results and expects a FY 2023 topline growth of 25%. The board also authorized a buyback of $1 billion in common stock. It is one of the top high growth stock picks of Motley Fool. 

On February 3, David Hynes, an analyst at Canaccord, increased the target price on Atlassian Corporation (NASDAQ:TEAM) stock from $150 to $175 and maintained a Buy rating. The analyst indicated that he would purchase shares if the stock price weakened, as he perceives the recent guidance cut as a more precautionary measure compared to the previous one.

According to Insider Monkey’s fourth quarter database, 50 hedge funds were long Atlassian Corporation (NASDAQ:TEAM), compared to 58 funds in the prior quarter. Alexander Becker’s Codex Capital is a prominent stakeholder of the company, with a position worth $345,050. 

Artisan Partners made the following comment about Atlassian Corporation (NASDAQ:TEAM) in its Q4 2022 investor letter:

“Among our bottom contributors were Atlassian Corporation (NASDAQ:TEAM), SVB Financial Group and Catalent. The tougher macro environment caught up with Atlassian in the quarter as the company is seeing slower software user additions as customers of all sizes moderate hiring and spending. However, the company still expects to grow sales at a mid-20s rate in Q4 and grow its strategically important cloud revenues 40%–45%. These are slower rates than we expected, and could slow further, but Atlassian’s growth metrics remain solid in light of the environment. In the short term, slower revenue growth will likely pressure margins and profitability given the company’s rapid hiring expansion in recent periods. But we detect a meaningful shift in tone from management on expense growth and margins now that top-line growth is slowing. While we fully expect Atlassian to keep investing in its large growth opportunities, we think a prudent reprioritization of this spending will lead to margin tailwinds in the medium term. We are sensitive to the slowing near-term growth dynamics but believe remaining invested is appropriate given the longer term profit growth potential.”

2. Tesla, Inc. (NASDAQ:TSLA)

3-year Revenue Growth: 158.3%

Tesla, Inc. (NASDAQ:TSLA) is one of the premier high growth stock picks of Motley Fool. The hedge fund owned 68,915 shares of Tesla, Inc. (NASDAQ:TSLA) in the fourth quarter of 2022, worth $8.48 million and representing 0.95% of the total 13F securities. The average 3-year revenue growth for Tesla between 2020 and 2022 came in at 158.3%. Thanks to Tesla, Inc. (NASDAQ:TSLA)’s nearly 100% surge since the beginning of 2023, Elon Musk has regained his position as the number one billionaire on the Bloomberg Billionaire Index as of February 28.

On February 27, according to Barclays analyst Dan Levy, Tesla, Inc. (NASDAQ:TSLA)’s upcoming investor day may not significantly impact the stock’s price given its recent surge, and may even trigger a sell-off. Nevertheless, the analyst suggests that the event is likely to reinforce Tesla, Inc. (NASDAQ:TSLA)’s long-term prospects, further solidifying the firm’s Overweight rating and $275 price target.

According to Insider Monkey’s Q4 data, 91 hedge funds were bullish on Tesla, Inc. (NASDAQ:TSLA), compared to 88 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 7.5 million shares worth $926.2 million. 

Baron Partners Fund made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q4 2022 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) declined 54% in the quarter and detracted 26.62% from the Fund’s overall performance. We initiated our position in Tesla in February 2014 at a split-adjusted price of $11.91. Over the subsequent two years, we acquired 16.65 million shares for an average split-adjusted price of $14.22. At the time of our final purchase in February 2016, the stock represented 9.6% of the Fund’s total investments.

Tesla produced approximately 35,000 vehicles in 2014, the year of our initial purchase. In 2022, it produced 1.37 million vehicles. Not only has its production grown tremendously, but it has also significantly increased profitability per vehicle. Tesla has expanded from producing high performance electric vehicles for wealthy aficionados to a company that produces affordable luxury cars for a sizable audience. In turn, it has transformed its industry. Investors rewarded this expansion in both production and profits, and the stock price increased to $265.25 at the end of the third quarter. Since 2016, we sold 4.5 million shares, or 27.0% of the original holding, at an average price of $218.39.

Investors have recently become concerned about many external factors. Elon Musk is Tesla’s founder and CEO. His purchase of Twitter has negatively impacted the perception of Tesla’s brand in the short term. China’s COVID policies and outbreak have paused purchases and production in the company’s largest region. Global recessionary fears and upcoming Inflation Reduction Act incentives also caused some to delay new vehicle purchases in various markets…” (Click here to read the full text)

1. ICON Public Limited Company (NASDAQ:ICLR)

3-year Revenue Growth: 176.7%

ICON Public Limited Company (NASDAQ:ICLR) was incorporated in 1990 and is headquartered in Dublin, Ireland. It is a clinical research organization that provides outsourced development and commercialization services worldwide. As of Q4 2022, Motley Fool Asset Management owns 67,600 shares of ICON Public Limited Company (NASDAQ:ICLR) worth over $13 million, representing 1.48% of the total portfolio. 

On February 22, ICON Public Limited Company (NASDAQ:ICLR) reported a Q4 non-GAAP EPS of $3.13, beating market estimates by $0.08. Revenue for the period came in at $1.96 billion, up 3.7% year-over-year, in-line with Wall Street consensus. 

Eric Coldwell, an analyst at Baird, raised the target price on ICON Public Limited Company (NASDAQ:ICLR) from $265 to $285 and maintained an Outperform rating on February 24. The analyst praised ICON’s transparent and consistent update, which included maintaining all aspects of their 2023 guidance. He also highlighted that the additional details on the business environment, margin expectations, and capital allocation objectives have increased his confidence in the company’s performance for 2023.

According to Insider Monkey’s fourth quarter database, 43 hedge funds were bullish on ICON Public Limited Company (NASDAQ:ICLR), compared to 30 funds in the prior quarter. 

Baron Asset Fund made the following comment about ICON Public Limited Company (NASDAQ:ICLR) in its Q4 2022 investor letter:

“We did add modestly to our stake in ICON Public Limited Company (NASDAQ:ICLR), the second largest participant in the $50 billion contract management organization (CMO) market. The company provides outsourced drug and device development and commercialization services to pharmaceutical, biotechnology, and medical device companies. We believe that ICON is poised to benefit from a variety of positive secular growth trends, and we believe that ICON should remain relatively unimpacted by potential disruption in the broader economy. As clinical drug trials become increasingly complex and global in scope, market share among CMOs has been shifting to large-scale providers like ICON. The company offers several advantages to drug developers, particularly smaller and mid-sized biotechnology firms that lack the internal infrastructure to run the trials necessary to obtain regulatory approval for their drugs. These include the economic efficiency associated with converting previously fixed costs to variable costs, and a significant reduction in the time required to bring new drug treatments to market. ICON’s large scale has also enabled the company to secure long-term strategic partnerships with multiple large pharmaceutical customers, which provides added visibility into their revenue pipeline.”

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