3 Top Growth Stocks to Buy and Hold for 2026

Key Concepts

• Growth Stocks: Stocks of companies expected to grow at a significantly faster rate than the overall market.
• Morningstar Style Box: A categorization system used by Morningstar to classify stocks based on growth, blend, and value, as well as market capitalization (large, mid, small).
• Economic Moat: A company’s ability to maintain competitive advantages over its rivals, protecting its long-term profits.
• Switching Costs: The costs (time, money, effort) that a customer incurs when changing suppliers or products.
• Enterprise Resource Planning (ERP) Systems: Integrated software suites used by organizations to manage business processes and data.
• Network Effects: The phenomenon whereby increased numbers of users enhance the value of a good or service.
• Compound Annual Growth Rate (CAGR): The mean annual growth rate of an investment over a specified period of time, assuming profits are reinvested during the term.

Top Growth Stocks for 2026: A Detailed Analysis

This analysis, presented by Susan Jabinsky of the Morning Filter podcast, identifies three growth stocks poised for strong performance through 2026. The selection criteria focus on companies exhibiting growth characteristics as defined by the Morningstar style box, inclusion on Morningstar’s “Best Companies to Own” list, possessing wide economic moats, demonstrating predictable cash flows, and exhibiting sound capital allocation by management – all while appearing currently undervalued.

Tyler Technologies: Dominating the Public Service Software Market

Tyler Technologies is highlighted as the leading provider in the public service software niche. Its competitive advantage stems from high switching costs, creating a wide economic moat. Specifically, replacing Tyler’s software within government systems is a complex and expensive undertaking, locking in customers. The company’s revenue is projected to grow at a 9% annual rate over the next five years, driven by increasing demand for Software as a Service (SaaS) and the need for local governments to modernize outdated Enterprise Resource Planning (ERP) systems. Jabinsky asserts the stock is currently “significantly undervalued” heading into 2026.

CoStar Group: Leveraging a Proprietary Database and Network Effects

CoStar Group’s core strength lies in its 35+ year investment in a proprietary database of commercial real estate information. This database serves as the foundation for its product offerings. The company’s wide economic moat is attributed to intangible assets (the database itself) and strong network effects – the more users contribute to and utilize the database, the more valuable it becomes. Revenue is anticipated to compound at a rate of 12.5% annually over the next decade. Jabinsky estimates the stock’s fair value at $81 per share.

SAP: A Global Leader in Enterprise Application Software

SAP, the world’s largest provider of enterprise application software and a leader in Enterprise Resource Planning (ERP), is presented as another compelling growth opportunity. Similar to Tyler Technologies, SAP benefits from high customer switching costs, contributing to its wide economic moat. Replacing SAP’s comprehensive ERP systems is a substantial undertaking for large organizations. Revenue growth is expected to be in the low to mid-teens in the near to medium term, gradually declining to the high single digits in the long term. The stock is also considered “significantly undervalued” at the time of the analysis.

Capital Allocation and Company Quality

A consistent theme across all three companies is strong management with a focus on smart capital allocation. This refers to how a company utilizes its cash flow – whether through reinvestment in the business, acquisitions, share buybacks, or dividends – to maximize shareholder value. The companies’ inclusion on Morningstar’s “Best Companies to Own” list underscores this quality.

Logical Connections & Synthesis

The analysis demonstrates a clear methodology: identifying companies with demonstrable competitive advantages (economic moats), strong growth prospects, and current undervaluation. The selection criteria are interconnected – a wide economic moat supports predictable cash flows, which in turn enables effective capital allocation, ultimately driving sustainable growth. The podcast segment advocates for a long-term “buy and hold” strategy for these stocks, capitalizing on their projected growth and inherent value.

The main takeaway is that these three companies – Tyler Technologies, CoStar Group, and SAP – represent compelling investment opportunities for growth-oriented investors seeking to benefit from long-term trends in their respective markets. They all possess characteristics indicative of durable competitive advantages and strong financial performance.