Wednesday'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 Cisco (Nasdaq: CSCO  ) touch a new 52-week high on the way to becoming a 4,000-bagger since going public? 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 (Nasdaq: BIDU  ) . 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 at 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 seek 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 of five stars from our CAPS contingent.

Here are today's candidates for your consideration:

Company

Closing Price, Nov. 28

CAPS Rating (out of 5)

5-Year Growth Estimate

52-Week Range

Morningstar (NASDAQ:MORN)

$76.09

*****

26.0%

$43.65-$76.49

Aspen Technology (NASDAQ:AZPN)

$17.57

****

16.6%

$9.57-$17.71

Axsys Technologies (NASDAQ:AXYS)

$40.57

*****

16.5%

$15.71-$40.82

Danaher (NYSE:DHR)

$86.99

****

15.8%

$69.11-$87.05

Waters (NYSE:WAT)

$78.27

*****

15.5%

$48.35-$78.27

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

This list features some small-cap companies that could be promising, if speculative, stocks. Yet these tiny titans can create astounding returns if bought before they get discovered.

Witness optics specialist Axys, whose 137.9% return since last November easily bests the S&P 500's 4.97% gain over the same period. To this day, only three analysts cover Axys, and institutions own less than 60% of the company's outstanding shares.

How about a trip to Aspen?
But my favorite among today's list is Aspen Technology, whose name evokes visions of the snow-capped peaks outside my back window. (We live in the shadow of the Rockies.)

Yet this Aspen is headquartered in Massachusetts, and its technology has nothing to do with mountains. Minerals, maybe. Here's how CAPS investor dennyr3, a user of Aspen's products, describes the business:

Aspen Tech products include Aspen+, Hysys and Aspen Icarus among many others. The entire Aspen suite of programs is available with the AspenOne package and is the best in class. Hysys is the most efficient refinery / petrochemical simulation package for the debottlenecking and design of these processes. Aspen+ is a similar program with its strengths in the basic and specialty chemicals arena but, it also handles refining and petrochemicals. It is the best simulator to use for batch processes as are common in pharma, agricultural, specialty plastics, etc. I am a process engineering manager at an engineering firm and we have used all of the above programs to great benefit. The competitors pale in comparison because Aspen has made full use of the innovative and intuitive power of Windows and their competitors have not.

Anyone else think that sounds like a competitive advantage?

The numbers also encourage me. Aspen trades for a very slight premium to its expected growth rate -- resulting in a 1.03 PEG ratio for 2008, according to CapitalIQ. Gross margin and return on capital, meanwhile, have been rising rapidly since 2005.

Intriguing, no? I'd say, and I'm adding the stock to my CAPS watch list as a result. But I'm also just one Fool. What's your take? Would you buy Aspen 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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