Thursday's Top 5 Growth Winners

Ask cheapskate value investors to buy a stock that's achieved a new 52-week high and you'll get one of two responses:

  1. Hysterical laughter.
  2. Sudden nausea.

Pity them, Fool.

How many times did Celgene (Nasdaq: CELG  ) touch a new 52-week high on its way to becoming one of the 10 best stocks of the past decade? Never assume that "rocket stocks" -- high-growth stocks that are also realizing heavy price appreciation -- are too expensive. What looks like a cliff could really be base camp on a climb toward the summit of Everest.

Rocket stocks, not rocket science
Each weekday in this column, we'll enlist the more than 78,000 pro and amateur stock pickers in our Motley Fool CAPS community to find stocks that are still climbing. We'll start with The Wall Street Journal's 52-week high lists. But we'll focus our search on stocks expected to boost net income by at least 15% a year for the next five years, and whose CAPS ratings sport at least two of the maximum five CAPS stars.

Here's what we've turned up today:

Company

Closing Price

CAPS Rating

(5 max)

5-Year Growth Estimate

52-Week

Range

Hologic (NASDAQ:HOLX)

$69.50

*****

25.6%

$45.88-$69.75

Powell Industries (NASDAQ:POWL)

$44.53

**

25%

$27.05-$44.53

GeoEye (NASDAQ:GEOY)

$34.42

*****

20%

$15.89-$34.55

Amedisys (NASDAQ:AMED)

$48.43

*****

18%

$29.76-$48.61

Lindsay (NYSE:LNN)

$71.40

*****

15%

$28.55-$71.98

Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

Our mostly small-cap list features some promising (though speculative) stocks. Yet these tiny titans can create astounding returns if they're bought before the market discovers them. Witness Lindsay, which makes irrigation systems for agribusinesses. It has more than doubled over the past 52 weeks, blowing away the S&P 500's 4.5% total return over the same period.

Here, let me give you a hand
Amedisys, a Stock Advisor pick that specializes in home health care and hospice care, has also done pretty well, up nearly 46% over the past year. But I think the stock still has room to run. Here's why.

First, the U.S. population is aging. Roughly 75 million baby boomers are either about to retire or will in a few short years. As these good souls progress from retired to elderly, they'll need care. Home health care is the best option. That's a fact that Medicare recognizes: The program covered 38% of total home-health-care expenditures in 2005, according to the Center for Medicare and Medicaid Services (CMS).

Second, Amedisys receives more than 90% of its revenue from Medicare payments, which reduces risk and ensures consistent cash flows. (Medicare, like Social Security, is a political hot potato.)

Yet even with these obvious advantages, Amedisys isn't expensive. The stock trades for around 19.5 times its projected 2008 earnings, resulting in a modest 1.12 PEG ratio. Returns on equity and capital, meanwhile, remain perched in the mid-to-high teens. Pretty impressive, wouldn't you say? I would.

But that's me. What's your take? Would you buy Amedisys at today's prices? Let us know by signing up for CAPS now. It's 100% free to participate.

Happy Holidays to you and your family.

For every post you make to CAPS or any Foolish discussion board in the month of December, The Motley Fool will donate $0.02 to charity. So give us your two cents and we'll pay it forward!


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