5 growth stocks in the bargain bin

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.

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No surprise there. Market panics occur daily. Just ask investors who hold shares of NetSuite (N, news, msgs), which one day this month fell more than 3.4% on no news whatsoever. Sheesh.

That's why all-star investors bet on growth over the very long term. They know that:

• Businesses that make investors billions always begin as growth stocks.
• The best of them feature massive and identifiable competitive advantgages.
• Growth as a strategy has the capacity to deliver annual returns of some 20% or better for decades at a time.

Of course, not any growth stock will do. We're looking for stocks that have earned the maximum five-star rating from the MSN CAPS investment community, and are forecast by analysts who cover the companies to grow their earnings by at least 20% a year over the next five years.

Five-star stocks are those that the community, on the whole, believes will outperform the Standard & Poor's 500 Index ($INX).

Now, with that preamble behind us, let's examine five top growth stocks. Bear in mind that this isn't a list of recommendations. Instead, these companies are offered as candidates for further research.

We have some decent stocks to work with, including Mercadolibre (MELI, news, msgs), Latin America's answer to eBay (EBAY, news, msgs). The Buenos Aires company went public in August and promptly lost its status as a growth winner –- its shares lost nearly half of their value in January.

Then there's ShengdaTech (SDTH, news, msgs), a Chinese company that makes chemical products and fertilizers. The stock was hot in late 2007, climbing from $3.95 on Sept. 14 to a 52-week high of $15.57 on Jan. 3. Trading at 15.6 times current-year estimates, the stock looks cheap.

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"CryptoLogic reported (on March 18) that fourth-quarter profit per share had tripled in the past year to $0.36 on $4.3 million in net income. That easily blew away analysts' expectations of $0.21 per share. In the fourth quarter of 2006, CryptoLogic earned just $1.7 million, or $0.12 per share."

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But there's more: While its competitors have struggled, CryptoLogic remains flush with cash, meaning that the company would be in a stronger position than its competitors if U.S. regulators overturn a ban on Internet gaming.

At least one CAPS investor, "freemoney4all," thinks it is likely that the ban will soon be overturned, presenting the Dublin, Ireland, company with new opportunities in the United States.

Soon? I'm not so sure. But I agree that the ban isn't likely to persist. What's your take? Would you buy CryptoLogic at today's prices? Let us know by signing up today at MSN CAPS. It's 100% free to participate.

This article was reported and written by Tim Beyers for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.

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