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Stock Strategist

Stocks for the Growth Watch List

These names have recently appeared on GrowthInvestor's radar.

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Our Growth Leaders and Emerging Moats lists are an integral part of the Morningstar GrowthInvestor newsletter. These lists contain our best growth ideas, and at the right price, I would gladly purchase these stocks for the Growth Portfolio. So to keep our radar screen up to date, here are some of the new stocks I've added to both of our watch lists.

 Silicon Labs (SLAB)
 Marvell Technology (MRVL)
To build a moat in the semiconductor industry, you must have world-class engineering talent, and these two companies have more than their share. Both Silicon Labs and Marvell have a twofold advantage because they are experts in high-performance chip design on the CMOS process. Their chips incorporate a significant amount of analog circuitry to process real world phenomenon such as sound or radio waves, and experienced analog engineers are in short supply. Few college students study analog engineering and it takes years of on the job training to become skilled. This is why analog chipmaker  Linear Technology (LLTC) earns 103% returns on invested capital, and its chairman can say, "If you would have a billion dollars, you could compete with Intel, but if you had $10 billion, you still couldn't compete with me, unless you hired my people." In addition, companies with a critical mass of engineers benefit from a network effect because good engineers want to work with other good engineers, and rookie engineers want to learn from a talented team.

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