5 Stocks Ready for Liftoff

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. Just ask investors who hold shares of Isilon Systems (Nasdaq: ISLN  ) , which yesterday fell more than 4% 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 is for the next great multibagger. But unlike the Rule Breakers team, which scours everything from financial statements to trade magazines to clinical reports in its 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

Recent Price

CAPS Stars (out of 5)

5-Year Growth Estimate

Cognizant Technology (Nasdaq: CTSH  )

$17.69

*****

24.5%

3SBio (Nasdaq: SSRX  )

$6.84

*****

20%

Hansen Medical (Nasdaq: HNSN  )

$7.35

****

30%

Peabody Energy (NYSE: BTU  )

$22.50

****

51%

Ultra Petroleum (NYSE: UPL  )

$34.03

****

23.8%

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. Cash-rich Cognizant plans to repurchase $50 million worth of its shares. Hansen Medical has bucked the bearish trend better than most. Peabody Energy is watching the free cash flow, and Ultra Petroleum has a tailwind lifting its CAPS rating.

Why you should buy 3SBio
But my favorite this week is Rule Breakers recommendation 3SBio, a Chinese maker of biogeneric drugs -- not to be confused with earlier Rule Breakers recommendation Mindray Medical (NYSE: MR  ) , a Chinese maker of medical equipment.

At the time of its recommendation in November, 3SBio was valued for less than the cash it had in the bank. The stock is up about 14% since. No doubt that's reassuring, especially in a market like this one. CAPS All-Star pedrokoz offers added assurance with this take on management:

On every fundamental basis this company is cheap. From a growth perspective it is VERY cheap. Management seems to have a better track on managing in an economy and market that most do not understand and have dome a remarkable job in growing it conservatively to date-a sign of good management. There seems to be a great deal of respect to equity holders and manage their balance sheet accordingly.

That sounds promising to me. But I'm more interested to know what you think. Would you buy 3SBio 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!

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool PRO team will accept new subscribers to their real-money portfolio service. Motley Fool PRO is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool PRO and to receive a private invitation to join, simply enter your email address in the box below.

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. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool.

Tim seeks the best of tech as a contributor to Motley Fool Rule Breakers, which counts 3SBio, Mindray Medical, and Hansen Medical among its recommendations.

The Motley Fool owns shares of Mindray Medical and is also on Twitter as @TheMotleyFool. Its disclosure policy overcame its growing pains years ago.


Read/Post Comments (1) | Recommend This Article (14)

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 31, 2008, at 6:19 PM, dividendgrowth wrote:

    Apart from UPL, they are all bankruptcy candidates.

    The est growth rate is so laughable that it's even worth mentioning.

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