5 More Top Growth Stocks

When Jim Cramer recently singled out NYSE Group (NYSE: NYX  ) on Mad Money, it was more than a proud moment here at Rule Breakers central. For me, it was yet more evidence of the growth-stock rally that's underway here in the U.S.

Consider NYSE's business. Economists may argue over the lasting effects of subprime scariness or carry-trade craziness, but stocks, bonds, and other financial instruments change hands in every economy. Just yesterday, the New York Stock Exchange handled roughly 1.5 billion transactions.

But there's a broader lesson at work here. All-star investors pick growth stocks like NYSE Group and its peers for three equally important and timeless 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
Of course, 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
Here are five more top growth stocks:

Company

No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Est.

GigaMedia (Nasdaq: GIGM  )

538

527

40.0%

Cynosure (Nasdaq: CYNO  )

83

79

31.0%

Comtech Group (Nasdaq: COGO  )

235

229

30.0%

Spartan Motors (Nasdaq: SPAR  )

160

158

24.0%

Satyam Computer (NYSE: SAY  )

211

209

23.0%

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. But of these five, Indian IT-services firm Satyam Computer interests me most.

That may seem a little unusual. Normally I don't like firms with a lot of competition. Satyam has to contend with local rivals Infosys (Nasdaq: INFY  ) and Wipro, as well as global consultants such as Accenture.

So what's so special about Satyam? I'll let CAPS All-Star millionairefools, whose picks rank in the top 1% of the community, explain the thesis:

"Good reputation amongst college students. One of the few who are looking to expand beyond services and move into products.... Ever-expanding market for at least [the] next 5 years without the froth that usually comes with such growth. More and more businesses are using IT services and more are acknowledging Indian firms' capabilities."

Intrigued? Do your own due diligence, and then check in with thousands of other investors at CAPS. 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, who is ranked 1,317 out of more than 24,600 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. NYSE Group is a Rule Breakers pick. Accenture is an Inside Value recommendation. GigaMedia is a Global Gains selection. The Motley Fool's disclosure policy is your portfolio's competitive advantage.


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