5 More Top Growth Stocks

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 teen outfitter Zumiez (Nasdaq: ZUMZ  ) , which on Wednesday fell more than 7% on no news whatsoever. Sheesh.

That's why all-star investors bet on growth over the very long term. They know that:

  1. Businesses that make investors billions always begin as growth stocks.
  2. The best of them feature massive and identifiable competitive advantages.
  3. 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

International Coal Group (NYSE: ICO  )

*****

97%

36%

A-Power Energy Gen. (Nasdaq: APWR  )

*****

97.5%

35%

KHD Humboldt Wedag (NYSE: KHD  )

*****

97.9%

32.8%

Denbury Resources (NYSE: DNR  )

*****

97.9%

29.3%

Noble Learning Comms. (Nasdaq: NLCI  )

*****

96.9%

20%

Sources: Motley Fool CAPS; Yahoo! Finance as of June 18.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.

We have some great companies to work with. International Coal Group has doubled since Foolish colleague Bill Barker recommended it to Hidden Gems Pay Dirt subscribers last January. A-Power Energy has been electric since joining the Nasdaq earlier this year. And oil extractor Denbury Resources is exhaling profits thanks to a process rooted in -- get this -- carbon dioxide.

KHD-ching
My favorite, though, is KHD Humboldt Wedag, a two-time Global Gains recommendation from Foolish colleague Nate Parmelee. Here's a snapshot of his thesis, taken from the May issue:

Instead of merely supplying the plan, parts, and know-how to get a [cement] plant started, KHD will soon build and operate plants, too. In some cases, it might take a very small ownership stake in the facility. But its main focus will be collecting fees for operating the plants. If these recurring fees are successful, they should earn higher returns on capital than KHD's existing business. And they'll add some steadiness to KHD's cement income, which otherwise follows the cycles of the industry.

I know what you're thinking. A cement producer as a growth stock? How can that be when housing is slowing? Easy; KHD is a global firm with Asia and the Middle East as its top markets. India alone expects to consume 12% more cement in fiscal 2009, the Centre for Monitoring the Indian Economy reports.

Here's the best part. All this growth can be bought for roughly 16 times current-year earnings estimates -- very cheap for a firm expected to improve its bottom line by 33% a year over the next five.

But that's my take. I'm more interested to know what you think. Would you buy KHD Humboldt Wedag 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!

Tim Beyers, who is ranked 19,312 out of more than 110,000 participants in CAPS, is a regular contributor to Fool.com and also writes for Rule Breakers.

International Coal is a Motley Fool Hidden Gems Pay Dirt pick. Zumiez is a Hidden Gems recommendation. KHD Humboldt is a Global Gains pick. Try any of these market-beating services risk-free for 30 days.

Tim didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool's disclosure policy is your portfolio's competitive advantage.


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