Growth stocks are the supermodels of the stock world, plain and simple. They're exciting, they have good stories, and they can make you a lot of money. Apple's
But for all their beauty, growth stocks are also the prima donnas of the market. They can be erratic, they don't always live up to their billing, and they tend to attract a shareholder base that's ready and willing to run at the first signs of slowdown. For these reasons, caution is certainly in order when you enter the world of growth investing.
Fortunately, The Motley Fool's CAPS service brings us the collective intelligence of a community of over 125,000 investors and is a great resource for separating the Jessica Albas from the Jabba the Hutts. Each of the stocks competing for this week's top spot has a market cap of at least $100 million, and each grew its net profit per share by at least 20% over the past three years. (Run the screen for yourself, if you like.)
Let's meet our contestants:
If the name Baidu
In the world of software, Oracle
Research In Motion
Sure, Apple's iPhone is great, but is it CrackBerry great? Research In Motion's
Satyam Computer Services
As one of the largest IT and business process outsourcing (BPO) providers, India's Satyam
The oil industry just ain't what it used to be ... six months ago. Oil prices are way down, and the bullish fervor with which investors pursued energy stocks is gone. Drilling powerhouse Transocean
The envelope, please...
Let's yank Satyam from consideration right off the bat. If nothing else, the company teaches investors the virtues of careful due diligence, rather than simply piling on the bandwagon.
Many CAPS members think the 60%-plus drop in Research In Motion's stock is overdone, but enough of them are nonetheless worried about Apple's iPhone and softening corporate demand to saddle RIM with a three-star rating on CAPS. Baidu also has a three-star rating, as concerns over the stock's valuation and China's economy keep this one out of prime time for now.
Is enterprise software really one of the last cuts to be made in the recession? CAPS members seem to think so. They've kept Oracle's stock at four stars -- a rating that definitely makes the stock worth a hard look. However, Oracle's database and dealmaking prowess can't quite give it the edge over five-star rated Transocean. Despite the nasty climate for oil, CAPS members still think Transocean's stock will top the S&P.
My assumption is that current oil fields will continue to deplete at a high rate thus driving the need to replace those reserves. I think off-shore drilling is the next lowest cost way to gain large oil reserves and thus [Transocean] and other off-shore drillers will continue to be in demand. Also, new builds will come on-line slower due to credit crunch and current low price of oil thus keeping day-rates high.
Now go vote!
Do you think Transocean has what it takes to be America's next top growth stock? Head over to CAPS and share your opinion with the rest of the community.
More CAPS Foolishness:
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool’s disclosure policy would surely win America's Next Top Disclosure Policy, but for some reason, there's no such contest.