AutoZone Inc. (AZO) is the No. 1 auto parts chain in the U.S. With approximately 4,645 stores in the U.S. and Puerto Rico there are few places in the country where you can't find an AutoZone nearby. The company also operates 235 locations and counting in Mexico and is working to expand its business in international markets. And this company not only serves up parts for cars and trucks, but does it better than anyone in the industry. AZO operating margins come in at 19% while the industry average is less than 13%! Its main competitors, Advance Auto Parts Inc. (AAP) and Pep Boys (PBY) can't even come close.
If you take a look at my Portfolio Grader tool, you'll see that this is an A-rated stock. AutoZone is strong in terms of earnings growth and earnings momentum as well as cash flow. But what really revs its engine is its top-notch level of buying pressure. Investors are still clambering to get on board this stock, so I expect there is plenty of upside left.
If you're a fan of Mexican food, or have a teenager who is, you've probably eaten at, or at least heard of, my next recommendation. Chipotle Mexican Grill (CMG) owns and operates one of the most popular Mexican food franchises in the country. The company has over 1,000 locations throughout the U.S. and Canada.
In the highly competitive Restaurant Industry, this company comes out on top in terms of long-term growth rate and sales growth. That's because there's nothing quite like Chipotle; it serves up sit-down quality burritos for just a skosh more than fast food prices. So, it's not surprising that investors are equally as enamored with Chipotle's stock; buying pressure for CMG has remained consistently high for the past twelve months. This is definitely an A-rated stock.
Chances are that you have a MasterCard credit card in your wallet. And the nice thing is that underneath its feel-good commercials, MasterCard Inc. (MA) is a rare case in the financial industry: It isn't imploding! That's because consumer credit continues to make gains as shoppers get more confident to make bigger purchases. While the rest of the financial sector is expected to post a 92% year-over-year profit loss, MasterCard is slated to grow earnings by 23%.
And even compared with other credit card companies, MasterCard is the growth leader. In the Business Services industry, MasterCard is among the elite companies in terms of long-term growth rate and return on equity. My other metrics all agree that MasterCard Inc. is solid fundamentally, so it deserves an exception for my general rule against buying financial stocks. This is an A-rated stock.
Intuitive Surgical Inc. (ISRG) is in a business that sounds like it comes straight from a science-fiction novel: Surgical robotics. Luckily for patients around the world, this revolutionary technology is not only for real, it is becoming more and more integrated into everyday hospital use. Intuitive Surgical Inc. got its big break in 1999 when it introduced the da Vinci surgical system. Complete with a surgeon's console, a patient-side cart, a 3-D vision system and wrist instruments, this system allows doctors to perform minimally invasive surgery with enhanced dexterity, precision and control. In the end, this technology benefits the patients, who usually experience less pain, a shortened hospital stay, fewer infections and less scarring.
In the most recent quarter, the company boasted 28% sales growth and 25% earnings growth. The company's profits also trumped the consensus earnings estimate by 12%! Intuitive Surgical is enjoying increased sales of its da Vinci Surgical system, especially in emerging markets like Korea. The company's return on equity is strong and buying pressure for this stock remains quite high. So, if you're interested in a leader in 21st Century technology, this stock is for you–it's an A-rated stock all the way.
If you've seen the ads with William Shatner, you know that Priceline.com (PCLN) allows buyers to name their own price for everything from airline tickets to rental cars to cruises. With its patented business model, the company generates virtually all of its sales from travel-related services. In the case of airline tickets and hotel reservations, Priceline.com keeps the difference between the price paid by the individual and what Priceline.com paid for the ticket or hotel room.
Although the stock's price may not seem like a bargain at first, the beauty of owning PCLN is that it is the most successful company in its industry. In the General Entertainment Industry, the company is first in terms of market cap, earnings growth, long-term growth rate and return on equity. The company's sales growth is second only to one other company. And this success translates into tremendous stock performance; in the New Year alone, this stock has climbed over 22%! PCLN is a B-rated stock, so I consider it a buy.
It's easy to see why Apple Inc. (AAPL) is leading the tech revolution, from digital media distribution to smart phones to personal computing. The company's iPod and iTunes lead the digital music industry, and the iPhone is one of the hottest smart phones out there. AAPL also hasn't forgotten its personal computing roots and has cut into the dominance of Windows with its OS X operating system and fleet of Mac computers.
As such, this company regularly dominates the market headlines and has generated a lot of buzz lately. Due to its recent blowout earnings announcement, the stock has jumped 24% just since the beginning of 2011! Rumors are also swirling around that there will be a March launch for the newest iPad and a 2012 release date for the iPhone 5. Apple management remains committed to keeping things fresh, so Apple makes a healthy addition to any well-balanced portfolio. This is an A-rated stock.
And now to our potential money pits: