5 More Top Growth Stocks

In the war of words between value and growth investors, a common refrain is that value wins over the long haul. Evidence supports this view. Problem is, growth has lengthy runs, too.

Consider the funds that are vying to match Legg Mason Value Trust's (FUND: LMVTX  ) phenomenal 15-year streak of beating the S&P 500. Three of six of the heir apparents identified by Morningstar, all of which are up on the S&P for the last eight years, are growth funds.

Call that a coincidence if you like, but a growth stock rally is underway right now. What's more, all-star investors seek growth in every market for three very good reasons:

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. 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 Motley Fool CAPS investor-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 which 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:


No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Est.

Digi International (Nasdaq: DGII  )




Tower Group (Nasdaq: TWGP  )




W-H Energy (NYSE: WHQ  )




SM&A (Nasdaq: WINS  )




Robert Half Int'l (NYSE: RHI  )




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. But it's Robert Half International that intrigues me most. CAPS player WolfhoundMac explains many of its intriguing qualities in his pitch:

"The labor market is getting tighter -- RHI will be able to increase the price to clients and capitalize on its existing relationships with both the temp labor force and the client base to increase earnings."

That's a lucid thesis. It also has a credible backer: San Francisco Federal Reserve Bank President Janet Yellen recently expressed concern over the tight labor market in public remarks. Her concern? Labor demand could boost inflation and, thereby, curtail growth.

But that's mostly good news for RHI -- high demand should lead to higher margins and higher earnings. Accordingly, Capital IQ has the stock trading at 19.5 times next year's expected profit, just above the firm's 18.3% long-term projected growth rate and, at worst, within fair value.

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.

Fool contributor Tim Beyers, ranked 1,225 out of more than 20,500 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 of 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. The Motley Fool's disclosure policy is your portfolio's competitive advantage.

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Related Tickers

10/21/2016 4:00 PM
DGII $10.85 Down -0.03 -0.28%
Digi International CAPS Rating: ****
RHI $38.88 Up +0.69 +1.81%
Robert Half Intern… CAPS Rating: *****
TWGP.DL $0.00 Down +0.00 +0.00%
Tower Group CAPS Rating: ***
WHQ $89.13 Down +0.00 +0.00%
W-H Energy Service… CAPS Rating: *****
WINS $6.24 Down +0.00 +0.00%
SM&A CAPS Rating: ****