Less than 5% of stocks are “genuine winners” – here’s how to find them

According to Munro Partners’ Portfolio Manager Qiao Ma, only 5% of the companies the team looks at are “genuine winners” – a reality she describes as “really humbling” as a stock picker.

Qiao adds that a genuine winner for Munro is a company with an aligned management team, great customer perception, and a product or service that wins. Mathematically, that is represented as a company that can double its earnings growth every five years.

However, growth is hard, according to Qiao, which is why so few companies make the cut.

"It is really hard to grow for one year. It's really hard to grow for two years. To grow for five to 10 years is incredibly hard", says Qiao. 

It’s why Munro has built a process that begins by identifying key structural tailwinds – like security, climate, or consumer - that can support long-term growth. Quite simply, if a company doesn’t have such a tailwind, it won’t come onto Munro’s radar.

From there, the team leans on its extensive research capabilities and investment process that is tailor-made to find growth companies. Whilst growth investing, by its very nature, can be volatile – as we have seen lately – the process has held up well through the recent market gyrations.

According to Qiao, the recent US reporting season saw most portfolio holdings deliver numbers in line with expectations or better, despite the tariff-related shenanigans that have taken place.

For Qiao, this is a good lesson and a timely reminder for all investors that there can often be a “big disconnect between headlines and fears at the macro level, from the actual fundamentals and micro level earnings”.

In the video above, Qiao shares more about the Munro process, and in particular, the Munro Global Growth Small & Mid Cap Fund strategy, which she looks after. She also delivers the bull case for current portfolio holding Axon Enterprise (NASDAQ: AXON).

According to research from AlphaSense, Axon's February results saw annual recurring revenue grow 37%, to US$1 billion, whilst Cloud and Services revenue grew 44%, to US$806 million. As Qiao discusses in the interview, one of the big drivers for Axon is its use of AI. 

On the recent earnings call post results, Axon founder Patrick W. Smith said, "We are positioning ourselves as the indisputable leader in delivering the power of AI in practical, usable applications to our customers". 

Watch the video above or read a written summary below. 

INTERVIEW SUMMARY

Staying focused through the noise

The first half of 2025 has been anything but predictable. Market volatility surged following early strength and geopolitical shocks like Trump’s proposed tariffs. But Munro's portfolio, Qiao says, has remained resilient.

“It has been a pretty brutal year just in terms of the daily volatility being completely out of the realm of normal circumstances,” Qiao said. 

“But… the companies just reported and the numbers were completely on track… and in some cases actually better.”

This disconnect between macro headlines and company fundamentals is a reminder of what really matters: earnings. 

While certain sectors like industrial climate plays felt the pinch, other areas like cybersecurity and data marketplaces strengthened. Despite the volatility, “the portfolio overall earnings projection now, versus a couple months ago… [is] completely on track.”

What makes Munro’s approach unique?

Munro’s strategy is singularly focused on growth. 

“We do one thing and one thing only at Munro Partners. We look for growth companies globally,” said Qiao.

That means companies with structural tailwinds – what Munro calls “Areas of Interest” (AOIs) – and a clear pathway to doubling earnings over five years. These tailwinds include themes like security, digital enterprise, and big data.

What sets Munro’s Small and Mid-Cap Fund apart is what Qiao calls its “unfair advantage.”

“We know what success looks like because we have been looking at companies like Nvidia and Microsoft and ServiceNow… for a decade.” 

With this deep research base, the team applies high standards used for large caps and looks for small and mid-cap companies that measure up.

“We keep the bar this high and go down the market cap. Which semiconductor company in high-performance compute actually fits this bar?”

Qiao also highlights Munro’s extensive industry network. 

“The small and mid-cap companies just organically come to us… and then we can do a lot of due diligence… by calling our big cap holdings.”

A high-conviction pick: Axon Enterprise

Axon Enterprise is one stock that ticks all of Munro’s growth boxes. Founded after its creator lost two friends to gun violence, Axon developed the taser as a non-lethal option for law enforcement. Over time, the company expanded into adjacent products like body cameras and cloud-based video storage.

The integration of AI has supercharged growth. Axon now uses generative AI to produce the first draft of police reports, saving officers one to two hours of paperwork per shift. “That’s the time he could use to patrol the street and keep the community safe,” said Qiao.

The result? A business that had been growing earnings at 20% annually is now growing at 35–40%. 

“It dramatically changed and accelerated the earnings growth of an already very healthy growth company.”

The company also fits Munro’s six key criteria for growth investments:

Why vigilance is key

While Axon is ticking all the boxes today, Qiao is quick to emphasise that staying vigilant is crucial.

“Statistically speaking… roughly 5% of the stocks that we touch are genuine winners,” she said. “So as of now, Axon is exhibiting all the characteristics of a true long-term winner, but we watch it like a hawk.”

This includes monitoring competition, changes in customer sentiment, or signs that the founder is losing focus. 

“Vigilance is the price you pay to be a great growth investor.”

Qiao concluded with a reminder about the discipline required in growth investing. It’s easy to be swept away by big trends, she said, but the numbers still have to add up.

“One of the lessons we learned… is that it has to be married up with earnings growth. And the standard answer from Munro will be: show me the earnings growth, and I’ll show you what I think about it.”

“Everything else is an interesting story, but it’s not investible.”

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Munro has an unwavering conviction that finding tomorrow’s winners comes from understanding how and why the world is changing – and their investment track record bears this out. Find out more by visiting their website or their fund profile below.

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