Are these the 3 best growth stocks money can buy?

As an investor, I’m constantly on the lookout for new companies to add to my watchlist or portfolio. Unfortunately it’s becoming harder to find quality companies that offer a good risk-reward balance after such a strong 18 months.

If sitting with cash isn’t an option, then it might be worth looking at your current holdings for companies that could keep rising, even if you’re sitting on big gains. The practice is called ‘averaging up’ and is the opposite of increasing your stake in a company when the share price falls.

I’ve skimmed over my holdings and my watchlist to find the best three companies that I would be averaging up on at the moment. Here’s the details:

Shares in telecommunications group M2 Group Ltd (ASX: MTU) have surged 22% this year and over 500% over the last five years following years of successful acquisitions. The group provides phone and internet services to individuals and businesses around Australia and is building an energy retailing arm that is showing promising growth. With another 8-10% growth forecast for FY2015, M2 is a company worth having another look at.

Freedom Foods Group Ltd (ASX: FNP) hasn’t performed quite as well as M2, up just 8% in 2014, but has risen 700% over the last five years. The group manufactures and distributes a range of allergen-free products in Australia, New Zealand and the US. It also distributes Australian milk to China under a range of company and private brands. Freedom Foods looks expensive based on last year’s annual report but I believe there’s a lot of room to grow in the next five years.

Star performer Domino’s Pizza Enterprises Ltd. (ASX: DMP) is a favourite among Australian investors and fast-food lovers because of its tasty pizzas and growth profile. The recent purchase of a swathe of franchises in Japan looks like it will allow the company to keep growing rapidly. The company does appear expensive, trading on a trailing PE ratio of 54 following a 100% rise over the last 12 months, but investors are willing to pay more for growing companies and Domino’s is one of the best.

Interestingly, the companies above were selected based on Warren Buffett's investment philosophy. The Motley Fool has just published a brand-new investment report on the SECRETS of Warren Buffett and your copy is FREE. Click here to discover Warren Buffett's investing secrets and two top ASX shares Buffett could love!

Motley Fool contributor Andrew Mudie owns shares in MTU and FNP. You can find Andrew on Twitter @andrewmudie

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.