NEW YORK (MONEY Magazine) - Classic growth companies can outpace the market over long stretches of time, especially if you begin your buying when share prices are depressed.

To identify such classic companies, MONEY screened the big-cap universe for the winners of the past decade and found 50 stocks that had produced compound gains of 20 percent or more a year.

Few companies can reach the 20 percent mark based on earnings growth alone. Ideally, you should try to find stocks that are trading at or below normal valuations.

That way, the share prices can profit from multiple expansion as well as earnings growth. A stock with 15 percent annual earnings growth can average 20 percent gains over a six-year business cycle if its P/E increases by 30 percent -- from 20 to 26, for instance.

The six companies profiled here have the most potential for earnings growth and P/E expansion (You can Click here to see the full list of 50.) The six are: Applied Materials, Microsoft, Citigroup, Home Depot, Pfizer and Berkshire Hathaway. (Click on any to go straight to profile.)

Applied Materials is extremely volatile -- 65 percent more so than the S&P 500. But over the past decade, the stock's enormous gains, an average of 44 percent a year, have more than justified that risk.

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The reason for this powerful but erratic performance is that the company continues to dominate the market for capital equipment used to make micro-processors and memory chips.

On expectations that PC sales are starting to improve, the stock is trading at nearly $20, up more than a third since September's low. At this point, Applied Materials (AMAT: Research, Estimates) isn't especially cheap, trading at 26 times earnings for the fiscal year ending in October 2003.

Nonetheless, the shares are still 60 percent below the all-time high set in early 2000. Over the past decade, the stock suffered several setbacks on that scale. And coming off each of those major lows, the company posted earnings increases of 30 to 50 percent. The rebound over the next five years could be even greater because advances in chip technology are creating opportunities for new kinds of fabricating equipment with higher profit margins. -- back to top

Microsoft has come through the bear market better than most of the Nasdaq elite and remains the model tech juggernaut. The software giant so dominates its markets that it continues to provoke antitrust suits.

To date, though, Microsoft has shown enormous skill at defusing those cases. And the company's resources are as expansive as its ambitions. Microsoft has no debt and more than $38 billion in cash. As founder Bill Gates has stepped back from operations, No. 2 Steve Ballmer is anxious to pick up the pace of innovation and acquisition. Future growth will depend on markets other than the Windows operating system and PC applications.

For that reason, Microsoft has been expanding in server operating systems, handheld computer software, database systems and even games. That diversification may not contribute much to the bottom line over the next year or two, but it could pay off enormously three to five years out.

At $53 a share, nearly 28 times earnings for the fiscal year ending June 30, 2003, Microsoft (MSFT: Research, Estimates) is trading at roughly the multiple it carried in the mid-1990s before the tech boom began. -- back to top

Citigroup was formed in 1998 through the merger of Citicorp banking and Travelers Group insurance. Stocks often disappoint in the first year or two after a big merger, but Citicorp has more than doubled. Moreover, CEO Sandy Weill is on the verge of completing another big deal, which should close before year-end. He's buying California's Golden State Bancorp, the second-largest U.S. savings and loan, for $5.8 billion. The acquisition could begin adding to earnings as early as next year.

Citigroup (C: Research, Estimates) is also in the midst of spinning off Travelers' property and casualty insurance division. Once all the dealing is done, Citigroup will be a well-balanced financial services firm catering to both consumers and corporate customers. As cost savings from the acquisitions are realized, Citigroup's earnings could grow at a 15 percent compound annual rate over the next five years.

Yet despite these impressive prospects, the stock is trading at just over $38, 11 times estimated earnings for 2003. -- back to top

Home Depot approached Bob Nardelli to be the company's new CEO when he was passed over at General Electric. Although GE's Jack Welch admired Nardelli's abilities as a superb operating manager, he decided to tap Jeff Immelt as his successor instead. Whatever disappointment Nardelli may feel, he has taken on his new job with characteristic fervor.

Home Depot's growth plan calls for 200 new stores a year, which will boost total square footage by 14 percent in 2002. In addition, same-store sales should rise about 4 percent annually. The company is expanding internationally -- especially in Mexico.

And Home Depot (HD: Research, Estimates) is actively trying to attract more corporate business, most recently adding Disney theme parks as customers. All told, earnings are projected to grow at least 18 percent a year.

Nonetheless, because of the recession and the recent change in management, Home Depot trades at around $37 a share, close to its lowest price since 1999. That's 20 times next year's projected earnings, the lowest multiple the stock has carried for more than a decade. -- back to top

Pfizer remains my favorite pick in the drug sector for long-term growth. Historically, the company has turned in annual earnings gains in the high teens. But earlier this year, Pfizer announced that growth could fall to single digits for a couple of quarters because of costs associated with new-product launches. In fact, the company spends more than $5 billion a year on R&D.

Pfizer (PFE: Research, Estimates) already has eight blockbuster products, including the antidepressant Zoloft, the cholesterol reducer Lipitor, and Viagra. Some of the company's most popular drugs are facing more competition, but Pfizer's massive investment in new products is expected to propel profits more than 17 percent annually.

Nonetheless, the stock trades at less than $35 a share, or less than 20 times projected earnings for 2003. That's a substantial discount to the 30ish multiples it carried through the late 1990s. -- back to top

Finally, if you happen to have a spare $70,000 lying around, you might want to consider buying a single share of Berkshire Hathaway (BRK.A: Research, Estimates). CEO Warren Buffett has always avoided splitting the stock to keep it too expensive for small speculators. (Of course, you can also buy the more affordable class B shares, which gives roughly the same exposure to Berkshire Hathaway -- a share traded recently for close to $2,300.)

Buffett's strategy of buying and holding big growth stocks with strong franchises has paid off handsomely, with a compound annual return of 24 percent since 1990. And although he cautions that the market won't soon match its gains in the 1990s, the stocks that Buffett likes typically shine in the first few years of an economic upturn. -- back to top