5 More Undiscovered Growth Stocks

Every one of us wants to buy the best stocks the market has to offer. History says that to do so, we're going to have to ignore just about everything coming from the white-marbled halls of Wall Street.

Consider the case of Hansen Natural. By 1997, the natural-beverage king-in-waiting was seven years out of bankruptcy, and low-calorie sodas had yet to catch on. Conventional wisdom said that Coca-Cola (NYSE: KO  ) and PepsiCo (NYSE: PEP  ) would suffocate Hansen. Conventional wisdom was wrong. Now, early investors in Hansen are sitting on a 250-bagger.

Running with the rebels
Nothing has changed in the decade since. Today's best growth stocks are still to be discovered. Not that you should expect Hansen-sized rewards -- 250-baggers are exceedingly rare. But decades of market-crushing gains can be had by daring to invest where most investors won't.

David Gardner, who captains the good pirate ship Rule Breakers, offers living proof. By discovering and then investing in little-known and frequently misunderstood growth stocks, he produced nine years of 20% average annual returns. 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 4,300 stocks.

CAPS applies user input to rate stocks from one to five stars. So, using CAPS, we're once again going to search for stocks that haven't yet met the threshold for a star rating, that have a minimum $250 million market cap, and that are expected to grow their earnings by at least 15% 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.

KV Pharmaceutical (NYSE:KV-A)

4

3

26.5%

Cabot Microelectronics (NASDAQ:CCMP)

9

8

22.5%

Signature Bank (NASDAQ:SBNY)

7

7

21.0%

Greatbatch (NYSE:GB)

3

2

18.0%

Altra Industrial Motion (NASDAQ:AIMC)

7

7

17.5%

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. My favorite, however, is gear maker Altra Industrial Motion for its microscopic 0.79 PEG ratio, which suggests a discount price.

I'm also encouraged by the CAPS All-Stars' support of Altra. More than half of those rating Altra have outdone 80% of the CAPS field. Every one of them expects the stock to outperform the broader market in the months and years ahead.

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; it's 100% free to participate.

See you back here on Friday 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 No. 1,466 out of more than 27,000 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. Coca-Cola is an Inside Value pick. The Motley Fool's disclosure policy is an investor's greatest discovery.


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Related Tickers

11/28/2014 12:59 PM
CCMP $47.30 Down -0.38 -0.80%
Cabot Microelectro… CAPS Rating: ***
GB $49.57 Down -0.67 -1.33%
Greatbatch, Inc. CAPS Rating: ***
SBNY $121.27 Down -2.12 -1.72%
Signature Bank CAPS Rating: ****
KO $44.83 Up +0.54 +1.22%
Coca-Cola CAPS Rating: ****
PEP $100.10 Up +0.75 +0.75%
PepsiCo CAPS Rating: ****

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