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. Just ask investors who hold shares of Motley Fool Hidden Gems pick Blackboard (Nasdaq: BBBB  ) , which yesterday fell more than 5% 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 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

Global Industries (Nasdaq: GLBL  )

841

97%

30%

Yucheng Technologies (Nasdaq: YTEC  )

336

97.6%

25%

Chipotle Mexican Grill (NYSE: CMG-B  )

938

98.1%

22.5%

ResMed (NYSE: RMD  )

127

92.1%

21.6%

Winthrop Realty Trust (NYSE: FUR  )

178

93.3%

20.9%

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. Global Industries is winning just enough construction business for its stock to be on sale. Others have put Yucheng Technologies on their contrarian shopping lists. Respiratory health specialist ResMed's stock is on the upswing. And Winthrop Realty is buying distressed assets without (gasp!) the aid of a government bailout.

How big is this burrito?
But my top pick for today is one of the best companies I've seen, and it’s equally favored by both our Rule Breakers and Hidden Gems services: Chipotle (NYSE: CMG  ) .

I think both the "A" and "B" shares look tasty, but it's the burrito baron's "B" shares, which grant the holder additional voting rights, that get the nod here.

"Great business, and B shares should move toward parity," wrote CAPS investor dollarpuppy last month. "Since these are targeted during buybacks it should help increase value. If the lower number outstanding reduces liquidity and price, a conversion option is still a possibility since these shares represent 10x the voting power."

Bill Mann had a similar thesis when recommending the shares at Hidden Gems. Same-store sales have since declined, but remained respectable in the third quarter at 3.1%. Growth, meanwhile, continues apace thanks to free cash flow and a sturdy balance sheet. Debt? What's that?

Organic ingredients and organic growth. Mix them together and, I think, you get a recipe for very tasty returns. That's why I own "B" shares today.

But that's my take. I'm more interested to know what you think. Would you buy shares of Chipotle 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!

Fool contributor Tim Beyers is slowly recovering his CAPS rating. At the time of publication, he had a position in Chipotle's "B" shares, which, along with Blackboard, has been recommended in Hidden Gems.

Tim seeks the best of tech as a contributor to Motley Fool Rule Breakers, which counts Chipotle's "A" shares among its recommendations. Get access to all of Tim's writings here. The Motley Fool also had a position in Chipotle's "B" shares. Its disclosure policy keeps growing in influence.


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  • Report this Comment On December 04, 2008, at 7:02 PM, rfaramir wrote:

    Correction. You contradict yourself in one sentence: "Same-store sales have since declined, but remained respectable in the third quarter at 3.1%."

    Last I checked 3.1 is a positive number. It takes a negative number to represent a decline in same-store sales.

    What you meant was the GROWTH in same-store sales has declined, meaning there are still same-store sales increases, 3.1% in fact, but this increase is smaller than the increases in previous quarters.

    Respectable it certainly is, especially when so many others are truly experiencing declining same-store sales.

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