Are you really a growth investor?
It's worth asking. Fast-moving tech stocks have taken a beating recently, leading to a slew of bargains for those with the guts to buy.
No surprises there. Market panics occur daily. Just ask investors who hold shares of Actions Semiconductor
That's why all-star investors bet on growth over the very long term. They know that:
- Businesses that make investors billions always begin as growth stocks.
- The best of them feature massive and identifiable competitive advantages.
- 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 |
Percent Bulls |
5-Year Growth Estimate |
|---|---|---|---|
|
Double-Take Software |
741 |
98.8% |
23.8% |
|
Focus Media |
743 |
98.0% |
38.3% |
|
Natus Medical |
1,041 |
97.6% |
26.5% |
|
LoopNet |
1,913 |
97.4% |
26.3% |
|
Exelixis |
1,693 |
96.7% |
24.9% |
Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.
We've got plenty to work with, though. Superstar investor David Nierenberg's partnership owns more than 10% of Natus Medical, which, like commercial real estate specialist LoopNet, is a Motley Fool Hidden Gems pick.
Then there's Double-Take Software, a Stock Advisor selection whose products back up and store critical data in the event of emergency. With a 0.71 PEG ratio for 2008, the stock is potentially cheap.
Excess in Exelixis
But my top pick for today is biotech Exelixis, a stock first recommended by my Rule Breakers teammate, Charly Travers, in the November 2005 issue. Quoting from his thesis at the time:
Take a guess how many entirely new cancer compounds Genentech
has in its pipeline. OK, no need to look it up, I'll tell you it has only three. Now take a guess how many cancer drugs Exelixis has in development. I hope you didn't guess low, because the answer is seven. Yes, you read that right. Tiny Exelixis has more than twice as many new cancer drugs in development as Genentech. That's why I'm so excited about the potential here. (NYSE: DNA)
The stock is down more than 21% since. But the business has improved. Multiple cancer compounds are in mid- and late-stage development, and any one of them could become the next billion-dollar drug. As CAPS All-Star ResearchLover wrote last week:
I am a molecular biologist and have been at presentations for mid/late stage compounds, such as PPAR ligands, that [Exelixis] is developing. They have the expertise to develop successful compounds. And they are at a bargain basement price now.
I agree, but I'm more interested in what you think. Would you buy Exelixis at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.
See you back here next week with five more top growth stocks. Fool on!
