5 More Top Growth Stocks

The growth stock rally was extended in January. Fund tracker Lipper, Inc., says that mid-cap growth led all investing styles, rising an average of 3.19% during January, versus 1.4% for the S&P 500. Mid-cap value funds, meanwhile, were up 2.71%.

But growth also beat value across the board. Large-cap growth funds were up an average of 2.36% versus a market-lagging 1.29% for large-cap value funds. Small-cap growth funds advanced 2.19% versus 1.76% for small-cap value.

That's quite a short-term record. Just remember that in the long term, all-star stock pickers go with growth because:

  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:

Company

No. of CAPS ratings

Bullish CAPS ratings

5-year growth est.

Omniture (Nasdaq: OMTR  )

377

365

37.0%

China Medical Tech. (Nasdaq: CMED  )

190

185

35.0%

Atheros Comms. (Nasdaq: ATHR  )

824

816

30.0%

MoSys (Nasdaq: MOSY  )

90

89

27.5%

BE Aerospace (Nasdaq: BEAV  )

102

101

20.0%

Source: 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. And I'm intrigued by a few of these five. BE Aerospace, for example, was my choice in the debut of this column, and it's up roughly 23% since.

But I've got my eye on another two-timer: Wi-Fi chipmaker Atheros Communications, which last appeared in this column in December. What's the allure? First, Foolish colleague Anders Bylund wrote eloquently in nominating the firm as the best small cap for 2007.

Second, there's this pitch from CAPS all-star Stan Huber, who goes by TMFPlatoish1 in these parts:

"Atheros is a small, focused, well-positioned semiconductor company in the exploding space of wirelessly enabling everything...Even though they are walking among giants, they have demonstrated the ability to take market share as they go. Their PAS radio is a big hit and opens up the Chinese cell phone market for them with their UTStarcom partnership. The rollout of 802.11n wireless LAN products will be another great growth opportunity over the next year. Still to come is the dual-mode (cellular/Wi-Fi) mobile phone that they are developing with Qualcomm for the U.S. market. They have a single chip radio for the new VoIP/Skype phones that should gain in popularity once they can get the price point down. This doesn't really even touch on the potential consumer market that is barreling down the tracks, as wireless connectivity becomes integrated into all kinds of devices -- cameras, portable gaming systems, portable music/video players, and who knows what else."

Intrigued? Do your own due diligence, 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 1,016 out of more than 21,600 in our CAPS investor intelligence database. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Omniture is a Stock Advisor choice. Atheros is a Hidden Gems pick. The Motley Fool's disclosure policy is your portfolio's competitive advantage.


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