7 Growth Stocks on Sale

It's easy to fall in love with one specific way of doing things. In the stock market, investors often find themselves practicing either growth or value investing, fervently defending the merits of their chosen path.

I frequently make the mistake of referring to myself as a dyed-in-the-wool value investor, because I look for stocks trading below their intrinsic value. The implication is that hunting for undervalued stocks and looking for growth companies are two completely different things.

This is a mistake because:

1. Growth and value investing are joined at the hip, and
2. The most awesome growth stocks are also undervalued stocks.

The best of both worlds
Successful investing isn't simply about buying the stocks with the lowest P/E ratios, or the ones with the most spectacular growth rates. After all, treacherous value traps and growth traps lurk around every corner of the market. Blindly following a particular investment "style" -- without regard to its flaws -- is the surest way to get caught in one of those stock snares.

Instead, the key to investing is putting your money on the most attractive risk/reward propositions Mr. Market has to offer. Buying growing companies at discounted prices is probably the best method by which to do that. In this way, you earn the double benefit of buying a stock that trades below its fair value today, and owning a business that's well-positioned to grow that value tomorrow.

It's kind of like buying a cake on sale, with delectable growth as the icing on top. In the grocery store (or should I say bakery?) of stocks, nothing is sweeter.

We've got these stocks PEG-ged
So, with our hearts set on growth -- but our brains stubbornly fixated on getting a fair price for it -- here are seven reasonably priced, fast-growing favorites of our Motley Fool CAPS community.

In addition to having five-year estimated growth rates higher than 20% and PEG ratios lower than 1, these stocks have received four- or five-star ratings from our pool of more than 23,000 individual and professional investors.

So, without any more chatter:

As always, don't take these stocks as well-formulated investment recommendations, but rather as candidates for further research. Regardless of which investment approach you take, due diligence is the thread that binds all superior returns.

To get you started, though, Gildan Activewear appears to be an attractive market-beating bet.

Growing out of their shirts
Montreal-based Gildan Activewear isn't exactly a household name, but it's a leader in activewear, underwear, and now even plain old socks, and there's a good chance that at least one of the company's garments is folded up in your home somewhere. Well, at least that's the case for me. In Canada, Gildan owns nearly half the T-shirt market, manufacturing more than 425 million shirts a year. Until recently, Gildan's products were marketed as high-quality, "no-name" brand clothing that sports teams and rock stars could plaster their logos on.

However, with new state-of-the art production plants and the acquisition of Kentucky Derby Hosiery (KDH), Gildan is finally seeking to market its products as comfortable, high-quality, name-brand apparel. The company is now focused on inking distribution deals with major retailers, such as the relationship it gained with Wal-Mart as a result of the KDH purchase. For the latest quarter, sales were up 54% while net income decreased year over year, primarily due to the acquisition.

Going forward, management expects Kentucky Derby to contribute to earnings in the latter half of 2007 and to fully add to earnings in 2008. As for our CAPS community, the general consensus is that founder and CEO Glenn Chamandy, along with his management team, are the perfect leaders to carry out these growth initiatives.

Here are three CAPS members who seem to have Gildan's investment qualities down to a T:

• tuzowilson: "Market leader in wholesale t-shirts. Now moving into socks (with a Walmart connection as well) on the retail side. Retail should provide higher margins and if Gildan can execute on manufacturing cost reduction they could dominate the sock market like they do for t-shirts."
• jmayas: "... Will also attempt to create a brand around the Gildan name to make a foray into retail. Risky but very profitable if done successfully and as lowest-cost manufacturer, Gildan can get it done. Fantastic management team, high insider ownership."
• stapelbroek: "I've owned this company for 5 years. This is one of the most competent management teams I've seen. They always have a five-year plan they are laying the foundation for. They are great at execution."

Get growin', Fool
So, does the sound of buying high-growth companies at decent prices make complete sense to you? More appropriately, how could it not? Join our Motley Fool CAPS community to get more analysis on the above ideas, create your own list of fairly priced growers, or even weigh in with a sharp opinion of your own.

Within moments, you'll have access to stock ideas that can provide the best of both the value and the growth investing worlds. Oh, and it's absolutely free. Now that's what I call a reasonable price.

For more CAPS Foolishness:

• Get Ready for the Fall
• Get Ready for the Bounce
• 5 Top Microcap Stocks

Foolish contributor Brian Pacampara has no problem paying up for growth, as long as his soda and fries get biggie-sized, too. He owns no position in any of the companies mentioned. Wal-Mart is a Motley Fool Inside Value choice. The Fool's disclosure policy always pays the full price for fairness.