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 WiMAX wonder Alvarion (Nasdaq: ALVR  ) , which yesterday fell more than 6% 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

IPG Photonics (Nasdaq: IPGP  )

*****

98.4%

30.0%

Dresser-Rand Group (NYSE: DRC  )

*****

95.2%

29.0%

Silicon Motion (Nasdaq: SIMO  )

*****

98.2%

25.0%

Darwin Prof. Underwriters (NYSE: DR  )

*****

97.1%

22.7%

ICON plc (Nasdaq: ICLR  )

*****

97.5%

22.4%

Sources: Motley Fool CAPS, Yahoo! Finance.

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

We've got some great companies to work with. I own shares of Silicon Motion because I believe that flash memory has many years of useful life left. So long as that's true, flash memory controllers will be needed. Silicon Motion makes some of the best.

IPG Photonics is a Rule Breakers recommendation. Corporately, the Fool owns shares. The thesis is simple. CAPS All-Star MJKpayday explained it this way in December:

If HG Wells, author of War of the Worlds (1898), used Martian "heat rays" to kill the puny humans they surely would have been IPG Photonic lasers. IPG, in a way only HG Wells could envision, is trying to remake the laser industry with high performance fiber lasers. Like the Martians, IPG will need to defeat the existing landscape filled with entrenched standard crystal lasers -- the bacteria -- if they want to remake this landscape.

How to get more black gold
Talk about a creative pitch. I'd be tempted to buy if it weren't for Dresser-Rand, which gets my top pick for today.

There are only two ways to get more oil. You can increase exploration, or you can improve yield during extraction and refining. Dresser-Rand speaks directly to the second need, as top CAPS stock picker rd80 explained last week:

Mr. Volpe made an interesting comment concerning R&D efforts to improve the ability of pumps to handle mixed gas and liquid flows. "So, I would say that we are ahead of the game, not behind the game and we're ahead of it with what I believe is leapfrog technology, which we've patented." I’m not sure exactly how much that benefits oil extraction, but at $130 a barrel, anything that makes extracting crude more efficient would certainly be appealing.

Agreed. I'd gladly pay 19 times forward earnings – which is where Dresser-Rand trades as of this writing -- for a piece of what may be a rule-breaking innovation in an industry that desperately needs it.

But that's my take. I'm more interested to know what you think. Would you buy Dresser-Rand Group 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 19,717 out of more than 110,000 participants in CAPS, is a regular contributor to Fool.com. He owned shares of Silicon Motion and Alvarion, the latter of which (like IPG Photonics) is a Rule Breakers recommendation, at the time of publication.

The Motley Fool owns shares of IPG. Its disclosure policy is your portfolio's competitive advantage.


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  • Report this Comment On June 26, 2008, at 7:43 AM, adam628 wrote:

    rumors in israel - ALVRION IS TO BE BOUGHT BY MOTOROLA.

    the price is going to be near 17$.

    good luck

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