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 biotech BioSante Pharmaceuticals (NASDAQ:BPA), which on Tuesday fell more than 9% on no news whatsoever.

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 Motley Fool 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 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:


No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Estimate





Hardinge (NASDAQ:HDNG)




Wonder Auto Tech. (NASDAQ:WATG)




American Dairy (NYSE:ADY)




National Instruments (NASDAQ:NATI)




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.

At first, I was tempted to go with VASCO, which is one of my best-ever picks for CAPS for all the reasons I offered here. But the stock, up nearly 167% since last summer, isn't the mystery it once was. Nor is it as cheap other fast-moving security data protectors -- Secure Computing (NASDAQ:SCUR), for example.

Measure this
But cheap can be a relative term. For example, even though National Instruments trades for close to 33 times earnings, I can't escape the feeling that the shares are mispriced.

And I'm not the only one. Of the 25 All-Star investors -- that is, those whose picks rank among the top 20% in the CAPS community -- who have rated National Instruments, 23 say the stock is a buy at these levels.

Perhaps that's because those who use the technology like it. Here's how CAPS participant Fireduck put it in August:

As a worker in the IT industry, it is rare to see a company doing things right. Their software development environment (LabView) allows developers to interface with a wide range [of] physical sensors and components. The software is being used a great deal in developmental robotics and autonomous systems. Their data flow programming model could have a huge impact on business data management if it were applied to that area.

I'll add that returns on capital and gross margin have been on a steady northward march since 2004 and free cash flow continues to blossom. Plus, management still owns 28% of the business, which means they've as much at stake as common investors.

To me, those are the marks of a company worthy of further study. Thus, I'll be adding the stock to my CAPS portfolio. But that's me. What would you do? Would you buy National Instruments at current prices? Let us know by signing up for CAPS today. It's 100% free to participate.

See you back here next week for five more top growth stocks.

Fool contributor Tim Beyers, ranked 8,289 out of more than 76,000 participants in CAPS, is a regular writer for Rule Breakers. Tim owned shares of Secure Computing, which is a Rule Breakers pick, at the time of publication. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool's disclosure policy is your portfolio's competitive advantage.