3 More Undiscovered Growth Stocks

Game-changing discoveries, though typically the stuff of legend, happen more often than we think.

This week offers a good example. Thanks to a multiyear, multimillion-dollar study, a consortium of British scientists has unearthed 24 genes that contribute to common diseases such as diabetes and arthritis.

Talk about a breakthrough. As lead researcher Peter Donnelly told The Washington Post:

... We have known that genetics plays a role, but we haven't been able to pinpoint the genetic factors which are involved. Our study is a new dawn to understanding genetic components of common diseases.

Think of the possibilities. If we can decode the genetic imprint of inherited ailments, new therapies will surely follow, saving thousands of lives -- perhaps millions.

Running with the rebels
Similarly, discovering outstanding growth stocks early in their development can create game-changing returns for your portfolio. Just ask David Gardner. By investing in little-known fast-movers such as America Online (before it merged with Time Warner (NYSE: TWX  ) ), he produced nine years of 20% average annual returns. History told him that these were the best value stocks available, and many became daybaggers.

That's why David and his team at Rule Breakers still seek to get in early on businesses 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 now has information on more than 4,600 stocks.

CAPS applies user input to rate stocks from one to five stars. Using CAPS, we'll once again 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% over each of the next five years.

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

Company

No. of CAPS ratings

Bullish CAPS ratings

5-year growth est.

PHI Non-Voting (NASDAQ:PHIIK)

7

4

30%

Dionex (NASDAQ:DNEX)

7

5

20%

AMIS Holdings (NASDAQ:AMIS)

8

6

18%

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 AMIS Holdings, the parent company of AMI Semiconductor, which makes mixed-signal chips for use in automobiles, medical devices, and other common equipment.

AMIS is also on the move, replacing nutrition specialist NBTY (NYSE: NTY  ) , a favorite of championship fund manager John Montgomery, in the S&P SmallCap 600 index. Meanwhile, its 1.07 PEG ratio suggests that the stock still has room to grow.

Intrigued? Due 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; it's 100% free to participate.

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

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

Fool contributor Tim Beyers, ranked 4,476 out of more than 29,800 rated investors 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. Tim's portfolio holdings can be found at his Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. Time Warner is a Stock Advisor pick. The Motley Fool's disclosure policy is an investor's greatest discovery.


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