5 More Undiscovered Growth Stocks

John Deere made his fortune inventing a steel plow that helped Midwestern farmers dramatically increase their production.

But riches came slowly. Though his company was founded in 1837, it would take 11 years, until 1848, for Deere to do enough business to justify moving it to more expansive facilities in Moline, Ill. That's where Deere (NYSE: DE  ) -- now a $15 billion global firm -- is still headquartered today.

Running with the rebels
Deere's early partners got rich by betting on him well before anyone else. Yet their story is hardly unique. Legendary growth investors like T. Rowe Price earned millions by seeking, and finding, the next Deere.

For David Gardner, who captains the good pirate ship Rule Breakers, betting on little-known and frequently misunderstood growth stocks led to nine years of 20% average annual gains. History told him that these were the best value stocks available.

That's why David and his team still seek to get in early on stocks that are reshaping, or creating, important industries. You can, too, with the help of our completely free-of-charge Motley Fool CAPS investor-intelligence database, which currently contains information on more than 4,000 stocks.

CAPS applies user input to rate stocks from one to five stars. Using CAPS, we're once again going to search for stocks that haven't yet met the threshold for a star rating, with a minimum $250 million market cap and expected earnings growth of at least 20% annually over each of the next five years.

Let's have the list
Now, with that preamble behind us, here are five growth stocks that have yet to be discovered.

Company

No. of CAPS ratings

Bullish CAPS ratings

5-year growth est.

FUJIFILM (Nasdaq: FUJI  )

7

6

39%

PHI (non-voting stock) (Nasdaq: PHIIK  )

7

4

30%

Double-Take Software (Nasdaq: DBTK  )

2

2

25%

TDK (NYSE: TDK  )

9

9

20.4%

EMS Technologies (Nasdaq: ELMG  )

5

4

20%

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. My favorite, however, is storage software maker Double-Take.

Why? First, its revenue rose more than 60% in the fourth quarter. Second, Double-Take's primary business -- data replication -- is among the faster-growing segments of the $9.8 billion storage software market, according to researcher IDC. And third, both of the CAPS investors who have rated the stock are All-Stars, including Wall Street firm Cowen & Co., whose picks rank in the top 1% of the database.

Intrigued? Do your own due diligence, 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; it's 100% free to participate.

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

How great is growth? Four of the dozens of stocks in the market-beating Motley Fool Rule Breakers portfolio have more than doubled in two years. Care to find out what they are? Click here to get 30 days of free access to the service.

Fool contributor Tim Beyers, who is ranked 1,370 out of more than 24,900 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. The Motley Fool's disclosure policy is a Fool's greatest discovery.


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