Investments that have been successful over the long term almost assuredly share at least one thing in common -- growth. You'll find very few companies that have been unable to increase their earnings and yet have still produced good returns for shareholders.

Think about it this way: Dividends aside, investors reap their gains when a company's stock price goes up. The stock price is typically driven by two levers: earnings and the multiple that investors are willing to pay for those earnings. Because earnings multiples tend to fluctuate within a certain range, long-term investors should have a keen focus on the company's ability to increase earnings.

Does it seem too simple? Maybe keeping it simple is a good plan sometimes. After all, as Third Avenue's Marty Whitman has put it:

Based on my own personal experience -- both as an investor in recent years and an expert witness in years past -- rarely do more than three or four variables really count. Everything else is noise.

With that in mind, I've kept it simple and dug up five stocks that analysts expect will bring long-term earnings growth of 10% annually or better. I've also pulled up the Motley Fool CAPS rating for each stock to show what some of the 130,000 members of the CAPS community think of the company's prospects.


Expected Growth

Forward P/E

CAPS Rating (out of 5)





Diamond Offshore Drilling (NYSE:DO)




Blockbuster (NYSE:BBI)












Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS.

Wall Street analysts aren't known for being supernatural, so not all of these estimates may pan out. However, this list may be a good place to dig in for further research -- in fact, I'll even get you started with some thoughts on Diamond Offshore Drilling.

Feeding the growth
I'm all for the work that's going into alternative energy sources. After all, not only is burning fossil fuels tough on the environment, but it'd be silly to think that the Earth's supply of oil, coal, and natural gas will last us forever.

However, low-cost, high-efficiency alternative energy sources are not going to be dropped off at our doorstep by the alternative energy fairies: It's going to take a while to ramp up their efficiency and bring down costs. So until then, we're going to keep right on guzzling oil and burning other fossil fuels.

The opportunity that offshore drillers such as Diamond Offshore are capitalizing on is the fact that easy-to-access oil reserves are getting harder and harder to come by. That means that if oil companies want to find new sources of black gold, they're forced to venture off the safety of terra firma. While the demand for drilling services took a major hit when oil prices collapsed last summer, Diamond Offshore has a strong backlog as a cushion. Also, demand could start to pick up again because oil prices have bounced significantly off of their lows in early 2009.

Calling all bulls
If there's one thing that CAPS members seem to love, it's offshore oil drilling. Diamond Offshore's competitors Atwood Oceanics (NYSE:ATW), Transocean (NYSE:RIG), and Ensco International sport the same top five-star rating that Diamond Offshore does.

Many of the 1,801 CAPS members who have given Diamond Offshore a thumbs-up have done so primarily because it is part of the offshore drilling clique. However, CAPS All-Star bsamim, who has been bullish on the company since early 2007, appreciates its operations:

I have liked this stock for a while now, it is a consistent [performer] and has done well. It is rebuilding their fleet and is introducing some new types of drilling ships that are larger and can do more […] types of drilling. These are some of their largest and newest ships and are going to start by drilling in Brasil prior to coming back to the Gulf of Mexico. ... The company has a very good utilization rate and has a good mix of long and short term contracts. Until they give me a reason to believe otherwise, I am fully bull on this stock.

But what do you think?
Do these stocks have what it takes to post solid growth in this economy? Or have analysts been too optimistic? More than 130,000 members of the free CAPS community share their opinions on thousands of stocks. Head over to CAPS and let the community know what you think of Diamond Offshore, or any of the other stocks listed above.

Related CAPS Foolishness:

Apple, Atwood Oceanics, and CEMEX are Motley Fool Stock Advisor picks. Dell is an Inside Value selection. CEMEX is also a Global Gains recommendation, and the Fool owns shares of it. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out the stocks he's keeping an eye on by visiting his CAPS page, or you can connect with him on Twitter @KoppTheFool. The Fool's disclosure policy likes to keep it simple -- make your disclosure properly and you don't wind up in the dreaded triangle choke.