5 More Top Growth Stocks

Conventional wisdom says that only value investors buy on the cheap. Hogwash.

All-star investors frequently seek bargains in beaten-down growth stocks.

Whole Foods Market (Nasdaq: WFMI  ) is one of the more popular targets lately. While trading within spitting distance of its 52-week low, it's attracted a crowd of expert stock pickers, including Harry Lange of Fidelity Magellan (FUND: FMAGX  ) .

Why should you care? Growth gurus like Lange know that taking advantage of volatility can lead to huge returns. Over time, growth leads to riches 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
Of course, not all growth stocks will do. Our weekly hunt searches 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 with a five-star CAPS rating that are expected to grow earnings by an average of at least 20% annually over the next five years. Five-star stocks are those that the community, on the whole, believes will outperform the S&P 500.

Let's have the list
Here are five more top growth stocks:

Company

No. of CAPS ratings

Bullish CAPS ratings

5-year growth est.

American Superconductor
(Nasdaq: AMSC  )

89

86

30.0%

Silicon Motion
(Nasdaq: SIMO  )

115

111

27.5%

PRG-Schultz Int'l
(Nasdaq: PRGX  )

14

13

25.0%

Techwell
(Nasdaq: TWLL  )

64

62

25.0%

Knoll
(NYSE: KNL  )

23

22

22.6%

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. Among this list, chip designer Silicon Motion, which recently reported impressive fourth-quarter earnings, interests me most.

For one thing, the stock trades for far less than its expected earnings growth rate. For another, all but one of the All-Stars rating this stock -- the CAPS players whose picks have outperformed 80% or more of the CAPS community -- believe it will outperform. When winning investors speak, I listen.

Intrigued? Do your own due diligence, then check in with thousands of other investors at CAPS. If you'd like, add your own commentary, too. 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, who is ranked 1,633 out of more than 24,200 in CAPS, is a sucker for growth stocks and a regular contributor to Rule Breakers. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. Whole Foods is a Stock Advisor pick. The Motley Fool's disclosure policy is your portfolio's competitive advantage.


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