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Stock Strategist

Five Underdiscovered Fast-Growing Companies

Walk the road less traveled with these potential growth stocks.

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When people hear the term "growth stock," a few old, reliable standbys may immediately spring to mind:  Microsoft (MSFT),  Johnson & Johnson (JNJ),  General Electric (GE),  Medtronic (MDT), and  IBM (IBM), among others. Some people might then shake their heads and sigh, "I almost bought that little company called Microsoft in 1986! If only I had!"

It's been many a year since the above companies were brash upstarts eager to prove themselves, waging guerilla warfare against the goliaths in their respective industries. Against long odds, they prevailed and in the process dug enviable moats around their domains, laying a foundation that might allow them to expand for decades to come. However, one might be forgiven for thinking that the glory days of these giants are over. Despite steadily increasing revenue and profits, investor returns in these companies range from 3.4% per year over 10 years for GE, to 8.5% per year for IBM. This isn't bad at all when compared with the paltry 2.3% compounded return racked up by the S&P 500, highlighting the strengths these franchises possess. However, these results won't exactly inspire bubbly letters to Grandma either.

Michael Tian does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.