5 Stocks Ready for Liftoff

Are you really a growth investor?

It's a question worth asking. Fast-moving tech stocks have taken a beating recently, leading to a slew of bargains for those with the guts to buy. Just ask investors who hold shares of Rule Breakers recommendation iRobot (Nasdaq: IRBT  ) , which yesterday fell more than 11% on no news whatsoever. Sheesh.

No matter. 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 seeks the next great multibagger. But unlike the Rule Breakers team, which scours 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 four or five-star rating in CAPS, and which are expected to grow their earnings by at least 20% annually over the next five years. Four and 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

Omniture (Nasdaq: OMTR  )

1,426

97.1%

37.3%

Accuray (Nasdaq: ARAY  )

426

95.5%

28.2%

Cogo Group (Nasdaq: COGO  )

638

96.4%

25.0%

Murphy Oil (NYSE: MUR  )

391

97.4%

21.3%

American Ecology (Nasdaq: ECOL  )

399

96.7%

20.0%

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 interesting companies to work with. Robot surgeon Accuray, like clean-up expert American Ecology, is on the upswing in CAPS land, even as peer Intuitive Surgical (Nasdaq: ISRG  ) is hitting low notes. Energy explorer Murphy Oil took a hike over the summer. And Cogo Group is profitable and trading for near cash.

Ogling Omniture
My favorite, however, is Stock Advisor selection Omniture, a maker of tools for measuring Web performance. Here's how CAPS investor vprtwatcher explained the thesis in October:

Recurring business model trading at low revenue multiple with 50% organic growth and prospect for huge (non-GAAP) profit margin as the customer base grows. Recognised leader in web optimisation, benefiting from long term trend towards commerce moving online. [Emphasis added.]

And in more ways than you think. Baby Breaker Twitter, for example, has helped Dell to sell $500,000 worth of refurbished computers.

To be fair, Omniture isn't helping Twitter to sell anything; Twitter is a rebellious media platform. But isn't it amazing how a finely tuned Web presence creates massive moneymaking opportunities? It certainly can't be a coincidence that Omniture has its own social media expert, Brian Watkins.

But the Web's sellers and marketers profit most from Omniture's services. Think of its wares as the tools for tuning an e-commerce engine. "Web analytics is fast becoming a core business intelligence and quality assurance tool for a growing number of businesses," Fool co-founder David Gardner wrote in his January re-recommendation. "Increasing demand will likely prove to be a long-term and durable trend, and Omniture has established the keystone position."

Agreed -- but that's my take. I'm more interested to know what you think. Would you buy Omniture at current 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!

Motley Fool Rule Breakers counts iRobot and Intuitive Surgical among its recommendations. Omniture is a Stock Advisor selection. Dell is an Inside Value pick.

Fool contributor Tim Beyers, is slowly recovering his CAPS rating. He didn't own shares in any of the companies mentioned in this article at the time of publication. Tim seeks the best of the tech as a contributor to Rule Breakers. See his  portfolio holdings and a collection of his writings. You can also follow him on Twitter, where he posts as @milehighfool. The Motley Fool posts as -- surprise! -- @TheMotleyFool. Its disclosure policy is hungry.


Read/Post Comments (4) | Recommend This Article (104)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 12, 2008, at 1:37 PM, briang467 wrote:

    While I have owned Omniture in the past and I work in web dev/online marketing, I'm very concerned about two things relating to the stock- Google and Microsoft/Yahoo. While web analytics is undoubtedly a large growth area, Omniture needs to be competitive with the other reporting tools. (some of their other main competitors are Coremetrics and WebTrends.)

    Omniture does have a competitive advantage because their product is recognized as best of breed. However, they will face increasing pressure from Google Analytics. GA is not nearly as capable as the Omniture suite of products, but it has a major advantage - it's free. GA just rolled out some new product features and it's clear to me that Google will continue to spend time/money adding features, cutting into Omniture's functionality differentiation.

    The other latent threat is Yahoo. While the company doesn't have the resources to do much yet, they did acquire a company called IndexTools. Their web analytics product is full-featured, but it's unclear what Yahoo is going to do. If they make it free, and if Microsoft buys/injects capital/partners with Yahoo, it could become another free alternative to Omniture.

    Based on the competition, Omniture may have to cut pricing in the future to stay competitive. If the potential revenue stream decreases, the stock price will eventually reflect this.

  • Report this Comment On December 19, 2008, at 11:19 AM, PauvrePapillon wrote:

    The significance of a strong competitive advantage cannot be overstated. When the market (correctly) understood that CyberKnife was a truly unique and revolutionary technology, investors bid Accuray’s post-IPO shares up into the low $30s. As Varian made repeated claims, in numerous press releases, interviews and conference calls, that its gantry-mounted machines could do the same thing as the robotically controlled CyberKnife, Accuray’s market cap shrank even though its economic fundamentals actually improved.

    On Saturday 6 December, Accuray, finally, fired back with two new animated videos, one for lung and one for prostate, that very effectively demonstrate what CyberKnife does and why it is fundamentally different from all gantry-mounted radiation sprayers. Since then, as of close of market yesterday, Accuray shares rose nearly 24 percent while Varian dropped nearly 10 percent against a NASDAQ composite index that gained 2.8 percent.

    The price action for both Accuray and Varian shares subsequent to the release of these videos occurred despite a major negative for Accuray, i.e., an ongoing investigation into management’s handling of certain inventory issues, and at least a small positive for Varian, i.e., the treatment of their first patient RapidArc patient in the UK.

    Accuray’s accounting issues were resolved yesterday evening with the announcement that an independent audit had concluded that no restatements would be necessary. The FY2009Q1 results were also released. Shares are sharply higher this morning.

    But there can be no doubt that Accuray’s videos are already a huge success because they are helping to restore the market’s understanding of Accuray’s competitive advantage. Proof can be found in that 24 percent move up which occurred even before the accounting cloud was lifted.

  • Report this Comment On December 19, 2008, at 11:20 AM, PauvrePapillon wrote:

    If you want to see those videos and evaluate them for yourself, you can find them on Accuray's homepage at http://www.accuray.com

  • Report this Comment On January 02, 2009, at 4:39 PM, PauvrePapillon wrote:

    Update as of close of market 2 Januray 2009.

    ARAY up 35, VAR down 8, TOMO down 22

    As of close of market today, Accuray is up 35 percent, Varian is down eight percent and Tomo is down 22 percent against a NASDAQ composite index that is up eight percent since 6 December 2007.

    Management is now in the process of reconnecting with investors in terms of effectively demonstrating its competitive advantage. In the absence of contravening negative factors, this alone will drive share prices northward. Now that they have a bit of wind at their backs, Accuray should be aggressively pursuing new money at every opportunity. The fact that, early in the year, management already has two investment conferences on their calendar is a very good sign. Perhaps they finally have a handle on this technology differentiation issue and how they can use it to drive up their market cap.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 791393, ~/Articles/ArticleHandler.aspx, 10/23/2014 8:10:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement