Growth stocks excel in many areas

Growth-stock investing, which focuses on companies whose earnings are expected to accelerate at an above-average clip, isn't playing favorites this year.

It is scattering its success stories all over the place, as indicated by the divergent tales of two hot stocks each up more than 60 percent this year.

The first, MasterCard Inc. (MA), boasts nearly one-third of the world's credit cards, a processing network with room to grow and strong profits. Although it faces lawsuits on charges such as anti-competitive behavior, this also underscores its presence in the global payment industry. Archrival Visa International is making plans to go public.

The second, Canada-based Research in Motion Ltd. (RIMM), is a mobile-data services powerhouse that has 9 million subscribers for its BlackBerry and recently added China as a market. Though speculative, it has a strong balance sheet with new models Pearl and Curve enhancing its attractiveness. The stock is splitting 3-for-1 in August.

"Growth is taking place this year across most industries and all market capitalizations, the only exceptions being housing, banking and pharmaceutical stocks," said Tom Jacobs, co-founder of Complete Growth Investor newsletter (www.completegrowth.com) in Marfa, Texas. "Some of the hottest stocks this year are well-established businesses, not tiny players that may come and go as the wind blows."

As proof that no growth-stock size has been left behind, mid-cap growth funds are up 14 percent this year, small-caps up 12 percent and large-caps up 11 percent, according to Morningstar Inc. Each slightly leads its counterpart size in value funds, which seek bargain-priced companies trading for less than inherent worth.

Although the stocks can be volatile, no one can say big technology lacks growth potential. Apple Inc. (AAPL) is up 54 percent this year, global positioning system device company Garmin Ltd. (GRMN) has risen 40 percent, and Intel Corp. (INTC) is up 23 percent.

But while a number of large stocks have had impressive growth, smaller stocks historically outperform larger stocks by about 4 percentage points on average per year, Jacobs said. That can add up over time.

That's why he recommends Key Technology Inc. (KTEC), a small-cap firm that is a leading designer and manufacturer of automated sorting and processing machines for the food industry. Its stock is up nearly 70 percent and still has growth potential, Jacobs said. It has strong cash flow and a backlog of orders for its systems that aim to improve quality and reduce cost.