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 Internap
That's why all-star investors bet on growth over the very long term. They know that:
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Businesses that make investors billions always begin as growth stocks.
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The best of them feature massive and identifiable competitive advantages.
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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 |
Percent Bulls |
5-Year Growth Estimate |
|
|---|---|---|---|
|
Guidance Software |
***** |
95.5% |
38.8% |
|
Atwood Oceanics |
***** |
99.0% |
33.5% |
|
Eagle Test Systems |
***** |
98.2% |
26.3% |
|
Atlas Energy Resources |
***** |
99.1% |
21.5% |
|
American Science & Eng. |
***** |
97.1% |
20.0% |
Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.
We have some decent businesses to work with. Atwood Oceanics has been a favorite of mine in columns past, and it's still a big winner for Stock Advisor. That's to be expected. With oil prices regularly touching record levels, the need for deepwater drilling is increasing.
Rule Breakers pick American Science & Engineering, meanwhile, trades for a potentially cheap 0.90 PEG ratio based on 2008 earnings projections. If only it weren't facing accounting disclosure issues.
Guiding your portfolio to excess returns
Which brings me to relatively unknown micro cap Guidance Software, whose technology helps to solve digital crimes. I think All-Star CAPS chronicler NetscribeSoftwre best explained the thesis in this pitch from a year ago. Quoting:
The ever increasing reliance of organizations on the electronic medium, be it emails, intranet, or Internet, has also exposed the key information to various risks and attempted manipulation. The new age data-related risks have purported companies like Guidance Software to create solutions for digital investigation. Though a niche category, the demand for digital investigation and cyber forensic solutions has seen a growing trend, with market reaching $600 million in 2005 ... the market is expected to grow by more than two-fold by 2009 ...
I'll add that the Pentagon recently determined that Web security needs more attention. Gudiance Software, like Secure Computing
But that's my take. What's yours? Would you buy Guidance Software 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!
