Are you really a growth investor?
It's worth asking. Fast-moving tech stocks have taken a beating in recent month, 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 Clearwire
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 that 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
With that preamble behind us, here are five more top growth stocks:
|
Company |
No. of CAPS Ratings |
Percent Bulls |
5-Year Growth Estimate |
|---|---|---|---|
|
AU Optronics |
***** |
94.7% |
20.0% |
|
Clean Energy Fuels |
***** |
96.5% |
27.5% |
|
Ceradyne |
***** |
97.2% |
47.0% |
|
Gmarket |
***** |
96.6% |
26.5% |
|
Itron |
***** |
96.4% |
24.3% |
Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.
We have some cheap growers to work with: flat panel display maker AU Optronics, for example. Its 0.43 PEG ratio based on 2008 earnings is simply mouthwatering.
Prime time for Ceradyne
Ceramics champ Ceradyne isn't quite that cheap. But its 0.77 PEG tells me there's plenty of value left in the shares. And I'm not the only one who thinks so. CAPS All-Star RugbyViking13 wrote this in pitching the stock last month:
A bet that global peace will not break out in the next few years. Even if the U.S. does pull out of Iraq, Ceradyne's products will still be in high demand globally.
By "products," our Foolish Norseman is referring to bulletproof ceramic armor vests. Those should never go out of style -- in times of peace or war.
Ceradyne also seems to be blessed with the financial strength to defend its business -- much as its armor defends soldiers in the field. Margins and free cash flow have improved dramatically over the past five years while return on capital remains above 20%.
But that's my take. What's yours? Would you buy Ceradyne 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!
