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 Motley Fool Rule Breakers recommendation Focus Media (Nasdaq: FMCN  ) , which yesterday fell more than 4% after a positive report from a Goldman Sachs analyst. 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 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

Ctrip.com (Nasdaq: CTRP  )

*****

96.4%

33.7%

Quiksilver Resources (NYSE: KWK  )

*****

98.4%

24.5%

Natus Medical (Nasdaq: BABY  )

*****

97.4%

22.2%

Middleby (Nasdaq: MIDD  )

*****

97%

21.5%

FLIR Systems (Nasdaq: FLIR  )

*****

97.5%

20.4%

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. Natus Medical is on fire. Ctrip.com is on sale. But my favorite this week is yet another Hidden Gems pick: oven maker Middleby, a multibagger for Fool co-founder Tom Gardner.

Piping-hot returns here!
I like Middleby for two reasons:

  1. CEO Selim Bassoul still owns more than 4% of the business. His last open-market sale was at more than $67 a share -- a greater-than-60% premium to yesterday's close.
  2. Middleby's return on invested capital, while lower than it has been, is still greater than 18%. Margins, meanwhile, have kept stable. These and other metrics suggest that Middleby's management is as skilled as ever at using funds to produce growth.

Middleby's valuation may also be attracting top investors. "Ken Heebner of the CGM Fund Family has a large stake in [Middleby] (through his Capital Development Fund, LOMCX)," CAPS All-Star JDSancho wrote yesterday. "I think very highly of Mr. Heebner and I don't think anyone can go wrong investing along side of him."

Me either. But I'm more interested to know what you think. Would you buy Middleby 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 18,980 out of more than 110,000 participants in CAPS, is a regular contributor to Fool.com. He didn't own shares in any of the companies mentioned in this article at the time of publication.

Ctrip, Middleby, and Natus Medical are Hidden Gems picks. Focus Media is a Rule Breakers recommendation. Try either of these market-beating services free for 30 days. There's no obligation to subscribe.

The Motley Fool's disclosure policy is your portfolio's competitive advantage.


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