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5 Growth Stocks Poised to Profit in the Fourth Quarter: Fahmy

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Sometimes the best things are hiding in plain sight, as the old saying goes. Keeping that in mind, Joe Fahmy of Zor Capital joins Breakout to discuss his top five stock picks poised to deliver results in the fourth quarter.

To be clear, Fahmy characterizes these stocks as aggressive and suitable for active investors. He also stresses that market momentum is a common theme that applies to the entire quintet, which is clear from the very first name. "I traffic in growth stocks," he says, "but if I'm wrong, it's not a big deal because I stop myself out."

Here are Fahmy's picks:

Netflix (NFLX)

Conspicuously hiding atop the S&P 500's year-to-date winner's list (with a 212% gain so far this year), Netflix makes the cut due to its strong institutional support, great technicals and very good relative strength as it has continued to rise even as the market has softened up this month.

"Usually four out of five stocks move with the general direction of the market," he says in the attached video. "This thing is bucking the trend, and I think we'll see new highs if the market continues to cooperate."

Related: Netflix Owns Nothing, Is Poised for Short-Term Drop: Pachter

When apprised of the fact that only 17% of analysts currently rate Netflix a "buy," Fahmy responded, "I love hearing that. Since when are analysts right?"

Chipotle Mexican Grill (CMG)

As much as Fahmy confesses a love for burritos, his pricey stock pick (52-week high of $418/share) on Chipotle has more to do with crowded stores than stuffed tortillas. "I like the Peter Lynch style of investing where every time I go into a Chipotle there's a line out the door and it's packed," he says.

"Rather than investing in McDonald's [which spun off the chain in 2006] for example, I'm looking for the next McDonald's," he says, citing it as the great growth story in the restaurant business.

But like Netflix, Chipotle's above-average growth is well established and arguably priced in, a reality that took the stock down 50% the last time it broke above $400 a share in April 2012.

"They're just beginning to expand overseas, as well as domestically," he says. "I think it has longer term upside as well."

Herbalife (HLF)

Prior to being foisted into the headlines over the past year for being fund manager Bill Ackman's favorite short idea, the Los Angeles-based nutrition and health supplement maker enjoyed a rather low-key existence, as it is not included in any major benchmark indexes.

Related: Herbalife Earnings Spark Rally: What You Should Do Now

Now, with the stock up almost 100% in 2013 and worth more than $6.6 billion, Fahmy says he'd rather side with Carl Icahn and George Soros in their public spat with Ackman. In addition, Fahmy says the technicals look good here, with the stock at a 52-week high and the fact that "they have about $5 or $6 [per share] of earnings expected next year," which, despite the jump higher, still leaves the stock cheap with a P/E Ratio of 13 or 14.

EOG Resources (EOG)

This Houston-based oil and natural gas play is comparatively calm compared to Fahmy's other picks, and is only up 30% year to date. Additionally, 80% of analysts also currently rate it a "buy." What Fahmy likes about this play on the ''shale and fracking boom" is that its "earnings and sales growth over the last three quarters have accelerated tremendously."

Splunk (SPLK)

After pricing its shares 70% above its projected IPO range last April, many felt that this data management outfit was doomed. Since its $17 debut, the stock has tripled in value and never ticked below $26.

"Everyone I talk to in the networking and software space says Splunk is involved in almost every deal," Fahmy says, holding out the company's 50% revenue growth as evidence of its growing popularity amongst Fortune 500 firms.

"I think this stock could see $70 over the next six to 12 months," he says, contradicting the current $50 average price target held by analysts.

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