5 More Top Growth Stocks

Are you really a growth investor?

It's worth asking. Even though talk of a growth-stock rally has spread to the pages of The Wall Street Journal, investing in fast movers can be a stomach churning-experience.

Think of Parkervision (Nasdaq: PRKR  ) , a maker of chips for wireless devices, which suffered a 6% loss yesterday on no news whatsoever. Surprised? Don't be. Market panics occur daily. That's why all-star investors bet on growth over the very long term. They know that:

  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 our Motley Fool CAPS investor-intelligence database.

Specifically, we're looking for stocks that have earned a five-star rating in CAPS, and which are expected to grow their earnings by 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
Now, with that preamble behind us, here are five more top growth stocks:

Company

No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Estimate

Yingli Green Energy (NYSE:YGE)

253

247

47%

Focus Media (NASDAQ:FMCN)

384

372

40.8%

Zix (NASDAQ:ZIXI)

136

134

40%

First Marblehead (NYSE:FMD)

2,106

2,037

36.1%

VASCO Data Security (NASDAQ:VDSI)

685

669

36.1%

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.

Bank security specialist VASCO remains one of my personal favorites -- it's my all-time best CAPS pick, after all -- yet, right now, I see more value in First Marblehead, a student-loan financier. The numbers are simply too compelling. Here's CAPS All-Star investorpoet to explain:

The market seems to be pricing First Marblehead as if [it is] going to lose 20% of [its] business next year and then grow at a rate of 11% for five years. I think the most reasonable and conservative valuation assumes a 14% five-year growth rate with a reversionary P/E of 11.2. This results in a value of $71 per share.

Seems fair. I'll add that return on capital recently soared above 50% for the first time since 2003. Does that strike you as the sort of business that deserves to be sold off like this? Me neither.

But don't take my word for it. Do 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; the service is 100% free.

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


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