The Stock Pickers' Bottom Line: Look for Growth

One clear theme emerges from today top headlines: Growth.

Stronger than expected economic data in the U.K. set the tone overnight, followed by an earnings report from Goldman Sachs Group, Inc. (GS) which exceeded consensus estimates by 33 percent. This was the investment bank's strongest "beat" in two years.

As the morning progressed, three additional items caught our attention:

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Significantly positive news flow from global corporations begs two questions:

1. How sustainable is it?

2. Who's next?

As RBC Capital Markets strategist Jonathan Golub opined yesterday on Surveillance, "Bull markets don't end when they get tired, they don't end when they get too expensive. They end when the next recession arrives and we are way far away from that next recession." In other words, the positive news we're hearing today should have time to percolate through the economy over the next several quarters.

So we screened the components of the S&P 500 Index according to consensus estimates for 2014 sales growth. We found the vast majority of 292 are forecast to grow less than 10 percent, while 100 will likely see declining sales, and a few dozen could record significant growth.

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Focusing on the 43 companies forecast to record sales gains exceeding 20 percent, we further screened for those companies where analysts have raised estimates during the past month. The list narrowed to 12: Biogen Idec Inc. (BIIB); Chipotle Mexican Gill, Inc. (CMG); Cimarex Energy Co. (XEC); Constellation Brands, Inc. (STZ); Devon Energy Corporation (DVN); Facebook Inc. (FB); Gilead Sciences, Inc. (GILD); Lennar Corporation (LEN); Micron Technology, Inc. (MU); Range Resources Corporation (RRC); Southwestern Energy Company (SWN); Tenet Healthcare Corporation (THC).

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These 12 companies are significantly outperforming the market. The lesson is clear: Pay attention to growth.

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