Finding strong growth stocks has challenged even the best investors in recent years. But even if you don't want to take a lot of risk in your portfolio, you can still find some solid growth opportunities even among the best blue-chip stocks in the market.
One of the last places many investors would look to find growth stocks is the Dow Jones Industrials
But what makes the difference between a good company and a great one is how it builds on past success. While some companies are content to churn out solid profits year after year, others keep their ambition to grow even larger. It's those companies that can make amazing long-term investments.
4 Dow growers
Today, I want to look at the four stocks that analysts believe have the best growth prospects over the next five years. But rather than taking their word for it, I'll go into some more detail about each company's true potential to weed out wannabes from stocks that will give you the real deal.
The maker of construction and farm machinery has a pretty simple growth strategy: tap into the world's natural growth by going where demand for more and bigger things is greatest. That has led Caterpillar to focus on emerging markets, where improving standards of living and economic prosperity have created the perfect conditions for Caterpillar to thrive.
Some see those conditions potentially changing out of Caterpillar's favor. But even as China, Brazil, and other emerging powers start to see their economies mature, Caterpillar can repeat the same formula in smaller countries as well. Overall, I'm very happy with the CAPScall I made on the stock earlier this month.
I've criticized this aluminum maker for slashing its dividend, and the company has gone through some tough times. But at its core, Alcoa shares many of the same growth opportunities as Caterpillar.
The big question for Alcoa is whether it can cut costs dramatically enough to offset weak aluminum prices and make it through this tough spell. If Europe can climb out of its economic doldrums, then that could be the catalyst for Alcoa to deliver on long-term growth forecasts. Otherwise, though, it could remain a rocky road for the metal maker.
Bank of America
After a terrible 2011, B of A is ready for a bounce. As Fool banking analyst Anand Chokkavelu pointed out recently, the company is so cheap that any good news could send the stock skyrocketing.
Indeed, that's what we saw last week when the bank announced earnings. Although the company owes its profits to one-time asset sales, the steps that CEO Brian Moynihan is taking to cut labor costs and get rid of non-core assets have shareholders excited about the stock for the first time in a while.
By contrast, Home Depot's stock has been on a roll lately. Some recent calls for a potential turnaround in housing may sound like the boy crying wolf one more time, but the home-improvement company has responded this time around.
As arguably the most-recognized brand in home improvement, Home Depot can continue its expansion plans beyond the U.S. into under-served markets like China. With frugal homeowners seeking to update their homes rather than trying to sell into this buyer's market for housing, Home Depot stands to gain from renovation activity as well as new construction.
Go for smart growth
Growth stocks can make or break your portfolio, but growth stocks with a solid pedigree of success give you the added bonus of security. These four stocks certainly have plenty of challenges ahead, but if they can deliver on their promise, they'll make their shareholders very happy.
Owning the right growth stocks can make your golden years a whole lot more financially secure. But to get even more tips, be sure to read the Motley Fool's latest special report. Inside, we reveal the names of three stocks set to produce long-term wealth for investors. It's free, but available only for a limited time, so click here and read it today.
Fool contributor Dan Caplinger is always trying to grow. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of The Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy grows with you.