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Picks | Discover high-quality growth stocks to add to your watchlist.
The rally continues with no end in sight. Could this be the beginning of a new bull market? Check out these companies before it’s too late!
In this week’s Edge Picks, we explore:
A century-old industry titan at the forefront of innovative environmental technology
A supply chain tech company growing earnings by 94.07% every year
A semiconductor stock with healthy margins and consistent growth
A beaten-down health & wellness company with huge upside potential
Let’s dive in.
Quality Compounders
 Donaldson Revenue | CompaniesMarketCap.com |
Donaldson (DCI)
Industry
Pollution Control Equipment & Services
Overview
Looking for a refreshing new pick? Donaldson is a globally recognized leader in filtration solutions, catering to a wide array of industries, from manufacturing to transportation and beyond. With a rich heritage spanning over a century, the company is renowned for its innovative technologies that purify air and liquids, ensuring cleaner and safer operations for various applications. This diverse product line includes advanced filtration systems and components designed to enhance performance, durability, and environmental sustainability across multiple sectors. Given that this is one of society’s greatest challenges to date, there are few companies better positioned than Donaldson to be at the forefront, creating cleaner and healthier environments for us all.
Financials
Return on Invested Capital: 19.00%
Profit Margin: 10.40%
Earnings Per Share (5-Year): 8.90%
Revenue (5-Year): 6.90%
Debt to Equity: 0.48
Market Cap: $7.198 Billion
Current Stock Price: $59.69
Intrinsic Value: $75.20
Margin of Safety: 20.63% Below Intrinsic Value
Competitive Advantages
Advanced Filtration Technology: The company continuously invests in research and development to create cutting-edge solutions that effectively purify air and fluids. These superior filtration systems not only improve equipment performance and longevity but also contribute to environmental sustainability, setting Donaldson apart in the industry.
Diverse Industry Applications: Donaldson’s broad range of filtration solutions spans across various industries, including manufacturing, aerospace, agriculture, and transportation. This diversity allows the company to leverage its expertise in filtration across multiple sectors, providing tailored solutions that cater to different market needs. This versatility positions Donaldson as a go-to partner for companies seeking reliable and effective filtration in various applications.
Global Presence and Customer Trust: With a strong global presence and a history of delivering high-quality products, Donaldson has earned the trust of customers worldwide. The company’s commitment to providing top-tier filtration solutions has solidified its reputation as a trusted and reliable partner across different industries. This trust, coupled with a vast network of global operations, gives Donaldson a competitive advantage in serving diverse markets and customer needs.
 Zebra Technologies’ Business Snapshop | Zebra Technologies |
Zebra Technologies (ZBRA)
Industry
Supply Chain Technology
Overview
Want to own a fundamental piece of the modern supply chain? Zebra Technologies is a global frontrunner in enterprise-level tracking and printing technology, specializing in innovative solutions that streamline operations and enhance productivity. With a legacy spanning over five decades, Zebra is renowned for its cutting-edge barcode and RFID systems that empower businesses across various industries, from retail and healthcare to manufacturing and logistics. The company’s products enable real-time asset tracking, inventory management, and improved operational efficiency, revolutionizing how businesses collect, analyze, and utilize data. To put it simply, without Zebra Tech, it would be impossible to keep track of today’s endless array of goods shipped all around the world.
Financials
Return on Invested Capital: 8.80%
Profit Margin: 9.16%
Earnings Per Share (5-Year): 94.07%
Revenue (5-Year): 9.20%
Debt to Equity: 0.82
Market Cap: $10.406 Billion
Current Stock Price: $202.61
Intrinsic Value: $380.79
Margin of Safety: 46.79% Below Intrinsic Value
Competitive Advantages
Innovative Product Portfolio: The company offers a wide range of solutions, including barcode and RFID systems, mobile computers, printers, and software. These cutting-edge technologies cater to various industries and provide businesses with tools for efficient asset tracking, inventory management, and data collection. Zebra’s commitment to innovation ensures that it stays ahead of the curve in providing advanced solutions that meet the evolving needs of different sectors.
Expertise in Data and Analytics: Zebra is not just a hardware company; it excels in turning data into actionable insights. Its solutions are designed not only to capture information but also to analyze and leverage that data effectively. This expertise in analytics and turning raw data into valuable business intelligence gives Zebra an edge, empowering businesses to make informed decisions that enhance their operational efficiency and performance.
Robust Partnerships and Ecosystem: Zebra has cultivated strong partnerships with other technology leaders, forming an ecosystem that enhances its offerings. Collaborations with software developers, system integrators, and industry-specific companies enable Zebra to create comprehensive solutions that seamlessly integrate into existing infrastructure. This interconnected ecosystem amplifies Zebra’s capabilities and ensures a more holistic approach to solving industry challenges.
 Allegro Net Sales & Non-GAAP Gross Margin | Allegro Microsystems |
Allegro Microsystems (ALGM)
Industry
Semiconductors
Overview
A newbie in the public markets, but a veteran of the industry, Allegro Microsystems stands as a global leader in developing high-performance power and sensing solutions. With over 20 years of experience, the company specializes in designing innovative semiconductor products that enable precise motion control and energy efficiency in various industries. These integrated circuits and sensor solutions cater to automotive, industrial, and consumer markets, providing vital components for applications like electric vehicles and advanced driver-assistance systems. By adding them to your portfolio, you would own a piece of a high-quality company with plenty of runway ahead.
Financials
Return on Invested Capital: 18.10%
Profit Margin: 19.20%
Earnings Per Share (3-Year): 3.70%
Revenue (3-Year): 24.90%
Debt to Equity: 0.03
Market Cap: $5.396 Billion
Current Stock Price: $25.79
Intrinsic Value: $26.81
Margin of Safety: 3.80% Below Intrinsic Value
Competitive Advantages
Specialized Expertise in Magnetic Sensing: Allegro Microsystems is renowned for its exceptional expertise in magnetic sensing technology. This specialization allows the company to develop precise, high-performance sensors that are crucial for various applications, especially in automotive systems like electric power steering, electric vehicle powertrains, and advanced safety features. Their proficiency in this area positions Allegro as a go-to provider for magnetic sensing solutions in demanding industries.
️ Innovation in Power and Motion Control: The company excels in developing innovative solutions for power and motion control applications. Their semiconductor products cater to industries seeking energy-efficient solutions, enabling precise control of motion and power management. Allegro’s advanced integrated circuits are vital components in diverse systems, from industrial automation to consumer electronics, offering superior performance and reliability.
Market Diversification and Adaptability: Allegro Microsystems’ products are adaptable and cater to a broad spectrum of industries, including automotive, industrial, and consumer markets. This diversification minimizes risk and allows the company to navigate changing market conditions. With a strong focus on providing tailored solutions for varied applications, Allegro remains agile and well-positioned to serve evolving industry needs.
Rising Star
 Medifast by the Numbers | Medifast |
Medifast (MED)
Industry
Health & Wellness
Overview
This small-cap is down bad, but do they deserve it? Medifast is a prominent health and wellness company, known for its science-based approach to weight management and overall well-being. With a legacy spanning over four decades, the company offers comprehensive programs and a range of nutritional products designed to support healthy lifestyle changes. This focus on providing clinically proven, portion-controlled meals and nutritional support has earned it a strong reputation in the weight loss and wellness industry. The only question that remains is will have a place in this market when weight-loss drugs like Ozempic and Wegovy dominate the headlines.
Financials
Gross Margin: 72.26%
Revenue (5-Year): 41.51%
Debt to Equity: 0.12
Cash on Hand: $157.76 Million
Market Cap: $677.03 Million
Current Stock Price: $27.41
P/S: 0.56
Catalysts
Health and Wellness Trend: Medifast operates in an industry experiencing a notable shift towards health and wellness. As more people prioritize healthy living and weight management, the demand for scientifically backed, effective solutions rises. Medifast’s focus on providing structured programs and nutritional products positions the company to capitalize on this growing trend, making it a strong player in a market where health-conscious consumers seek reliable and proven solutions.
Diverse Product Portfolio and Adaptability: Medifast’s range of products extends beyond traditional weight-loss meal plans, encompassing broader wellness and nutritional offerings. The company’s adaptability in diversifying its product line to meet evolving consumer needs positions it as a versatile provider in the health and wellness sector. This diversity, along with its agility in responding to market demands, allows Medifast to remain resilient and capture a larger share of the health and wellness market.
Strong Distribution and Network Growth: Medifast’s strategic expansion of its distribution networks, including partnerships and direct-to-consumer sales, has significantly enhanced its market reach. The company’s distribution and network growth strategies provide broader access to its products and programs, reaching more potential consumers and expanding its market footprint. This expansion sets the stage for increased market penetration and heightened brand visibility, further solidifying Medifast’s position in the health and wellness sector.
Our Methodology
Quality Compounders
Our first goal as investors is to never lose money. The most effective way to accomplish this is by investing in world-class businesses that are trading below their intrinsic value. A world-class business is financially healthy (i.e. high-profit margins, growing revenue and earnings, as well as little to no debt), has multiple durable competitive advantages, and has a brilliant management team (i.e. ROIC measures how effectively a CEO allocates capital). We strive to buy these businesses below their intrinsic value because it limits the downside risk while improving the upside potential (i.e. think of it like buying a Ferrari at 50% off, then selling it to someone else at full price, risk-free). If one can find these opportunities and their conviction is strong, then one should take full advantage before the rest of the market realizes what they are missing.
Rising Star
Small or early growth companies (i.e. less than $1 billion market cap) may not be profitable or have a durable competitive advantage quite yet, but they still pack a punch. Investing in these businesses is a tricky game, but if you can spot them before they take off, it may be the only investment you ever need to make. To spot a rising star, the business must be financially stable (i.e. high operating margin, growing revenues, little to no debt, and ample cash on hand), have a large addressable market with multiple catalysts, and a highly ambitious and motivated management team that is willing to do whatever it takes to succeed. If you can find early-stage businesses with these characteristics, then you may be on the path to financial freedom quicker than you think.