Tuesday's Top 5 Growth Winners

Ask cheapskate value investors to buy a stock that's achieved a new 52-week high, and you'll get one of two responses:

  1. Hysterical laughter.
  2. Sudden nausea.

Pity them, Fool.

How many times did Best Buy (NYSE: BBY  ) touch a new 52-week high on the way to becoming one of the 10 best stocks of the past decade? Too many to count, of course. (See for yourself.)

Let that be a lesson. Rocket stocks -- that is, high-growth stocks that are also realizing heavy price appreciation -- are sometimes worth buying.

Rocket stocks, not rocket science
And sometimes they're worth buying in bulk. Think of Baidu.com. My buddy Rick Munarriz recommended China's top search engine to our Rule Breakers subscribers at $83.37 in October of last year.

I thought he was nuts. I mean it. The stock was both expensive and on a tear. So I argued against buying it in a January duel here on Fool.com. Now Baidu is a four-bagger. How I wish I had listened to what Rick was telling me all those months ago.

Don't do as I did. Never assume an expensive stock is too expensive. What looks like a cliff could really be base camp on a climb towards the summit of Everest. Each day in this column, with the help of the 75,000 pro and amateur stock pickers in our Motley Fool CAPS community, we'll aim to find those still climbing.

Our candidates will be found daily in the 52-week high lists at The Wall Street Journal. But few highfliers will make the cut; we're looking for stocks expected to boost net income by at least 15% annually over the next five years and which earn at least two stars (out of five) from our CAPS contingent.

For those who've noticed, I lowered the criteria to include two-star stocks because some of the best stocks in the history of the Rule Breakers portfolio either were or still are two-star picks. Baidu, for example.

With that, here are today's candidates for your consideration:

Company

Closing Price

CAPS Rating (out of 5)

5-Year Growth Estimate

52-Week Range

Deckers Outdoor (NASDAQ:DECK)

$143.81

**

21.3%

$53.05-$148.70

Perrigo (NASDAQ:PRGO)

$30.86

*****

19.6%

$16.09-$31.27

Rofin-Sinar (NASDAQ:RSTI)

$88.33

*****

16.8%

$54.76-$88.64

PharmaNet Development (NASDAQ:PDGI)

$39.63

***

16.7%

$18.59-$40.50

LaBarge (AMEX:LB)

$14.70

***

15.0%

$9.70-$15.10

Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

Our mostly small-cap list features some promising, though speculative, stocks. Yet these tiny titans can create astounding returns if bought before they get discovered.

Witness Deckers. Holders of shares in the company behind UGG boots have enjoyed a massive 166% gain over the past 52 weeks, easily besting the S&P 500's 3.3% return over the same period.

Prego, Perrigo
The momentum-chasing beast that hides within my Foolish exterior wants badly to chase Deckers. Or, for that matter, current Motley Fool Hidden Gems recommendation Rofin-Sinar. Laser technology has been a good business for investors; shares of Rofin-Sinar are up more than 50% since last November.

Nevertheless, of today's candidates, I'm most intrigued by the medicine men at Perrigo. CAPS investors are mostly to blame. Look at these numbers:

Metric

Perrigo

CAPS stars (out of 5)

*****

Total ratings

86

Bullish ratings

83

Bull ratio

96.5%

Bearish ratings

3

Bear ratio

3.4%

Bullish pitches

12

Bearish pitches

1

Data current as of Nov. 27.

And did I mention that all 24 All-Stars -- that is, investors whose overall performance ranks in the top 20% of the community -- give Perrigo a thumbs-up? Capsperson, who is ranked in the top 2%, explains the thesis:

This company went public about 15 years ago. They have a gastrointestinal med that is switching from Rx to OTC, which should benefit them. Biggest customer is Wal-Mart (NYSE: WMT  ) , second biggest customer is [Caremark CVS]. 20% + exposure overseas. I think its a good buy.

Considering the 1.19 PEG and slowly rising returns on capital, I'm inclined to agree. But that's just my opinion. What's your take? Would you buy Perrigo at today's prices? Let us know by signing up for CAPS now. It's 100% free to participate.

See you back here tomorrow for more rocket stocks.


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