More Top Growth Stocks

For some investors, "growth stock" is code-speak for "overvalued." That's understandable. When I searched Google for the phrase this morning, one of the top five results was coverage of Research In Motion's (Nasdaq: RIMM  ) better-than-expected third-quarter results. Though the stock is up 93% over the past 52 weeks, investors participating in Motley Fool CAPS say RIM is woefully overvalued. I agree.

So you should ignore go-go-growth stocks, right? Wrong. Not only is growth due for a rally, but all-star investors have also made billions investing in high-octane stocks. These champs know that growth as a strategy has three important advantages:

1. Businesses that make investors billions always begin as growth stocks.

2. The best of them feature massive and identifiable competitive advantages.

3. Growth as a strategy has the capacity to deliver 20% or greater annual returns for decades at a time.

How we do it
But not all growth stocks will do. Our weekly hunt is for the next great multibagger. Think of oven maker Middleby (Nasdaq: MIDD  ) . But, unlike David Gardner and his team at Motley Fool Rule Breakers, who scour everything from financial statements to trade magazines to clinical reports in their research, we're going to rely on the CAPS community-intelligence database.

Specifically, we're looking for stocks that are expected to grow earnings by an average of at least 20% annually over the next five years and have earned a five-star rating in CAPS. Five-star stocks are those that the community, on the whole, believes will outperform the S&P 500.

Let's have the list
Now, with that preamble behind us, here are five more top growth stocks.

Company

No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Estimate

Somanetics (Nasdaq: SMTS  )

39

39

28%

Taleo (Nasdaq: TLEO  )

14

13

25%

PAR Technology (NYSE: PTC  )

63

61

20%

ShinhanFinancial (NYSE: SHG  )

12

12

20%

Aspreva (Nasdaq: ASPV  )

336

334

20%

Sources: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research. Among the list, pharmaceutical Aspreva interests me most for its intriguing financials.

CAPS all-star GravityProof offers an explanation:

"One drug is producing all these bucks: CellCept, which is given as an immunosuppressant to kidney, heart, and liver transplant patients. But, OH NO! There's a generic entering in 2009! Well, no there's not. Though it will go off patent -- everything does. But what's a doc going to write with a transplant patient: the leading therapy or some generic that has to undergo solubility tests? That's right -- she's (he's) going to write CellCept."

Intrigued? Do your own due diligence, and then check in with thousands of other investors at CAPS. And, if you'd like, add your own commentary. You'll be helping your fellow Fools and testing your ideas at the same time. Click here to get started now; the service is 100% free.

See you back here next week for five more top growth stocks.

How great is growth? Three of the dozens of stocks in the market-beating Motley Fool Rule Breakers portfolio, of which Bankrate is a member, have quadrupled in two years. Care to find out what they are?Get30 days of free access to the service.

Fool contributor Tim Beyers, ranked 1,336 out of 18,179 in Motley Fool CAPS, is a sucker for growth stocks and a regular contributor to David's Motley Fool Rule Breakers service. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Fool profile. Middleby is a Hidden Gems pick. The Motley Fool's disclosure policy is your portfolio's competitive advantage.


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