New stocks for 'Today's List of Top Growers'

(MONEY Magazine) -- Building your portfolio around a core of blue-chip growth companies, such as those in the Sivy 70, is a smart long-term strategy. Not all 70 stocks will be compelling bargains all the time, but they're each worth owning if you get the chance to buy when the stock is cheap relative to its growth potential.

Unnecessary turnover cuts into your returns, so I keep companies on the list if they're just going through a bad patch. From time to time, though, a stock ceases to meet long-term benchmarks. And so, based on the latest data, I have replaced Dell (Charts, Fortune 500) with Hewlett-Packard (Charts, Fortune 500), First Data with Automatic Data Processing (Charts, Fortune 500) and Tyco International with Corning (Charts, Fortune 500)

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The new additions have little debt and offer well-above-average growth. Here's a closer look at them.

The case for replacing Dell is simply that the computer-maker's results have deteriorated, and it's not clear how it can restore rapid growth. Dell's greatest strength has been cost-efficient production of made-to-order PCs. The company has had initial success broadening that business by selling through Wal-Mart and other stores. But managing large inventories will make it harder to maintain profit margins.

By contrast, Hewlett-Packard has been performing well since CEO Mark Hurd took over from Carly Fiorina in 2005. Today, HP is a leading producer of computer servers and is tied with IBM in many types of computer storage systems. In addition, sales of notebooks and personal computers are booming.

Revenue rose 13 percent in the most recent quarter. And long-term earnings growth is projected to average around 14 percent a year. But even after nearly doubling over the past 2-1/2 years, the stock looks reasonably priced, trading at less than 17 times projected earnings for the current year. That superior performance at a moderate multiple is a sharp contrast to slower-growing Dell, which trades at a premium P/E of almost 21.

First Data, which processes credit-card transactions, would likely have disappeared from the Sivy 70 (and the stock market) in any event because it has agreed to be acquired by a Kohlberg Kravis Roberts affiliate. To replace it, I've chosen Automatic Data Processing, which handles corporate payrolls. It has more than 570,000 business clients and pays 1 in 6 U.S. private-sector workers.

Earlier this year, ADP completed the tax-free spin-off of its brokerage business. That leaves payroll processing as nearly 85 percent of continuing operations. And it's a fine business, thanks to the efficiencies that come with size and the eagerness of corporations to outsource data processing to hold down costs.

ADP managed a 14 percent gain in revenue for the most recent quarter - and a 20 percent increase in earnings from continuing operations. Those big profits are helped by stock buybacks using the ample cash the company generates. Analysts project that earnings growth will average as much as 15 percent annually over the next five years. Attractive for the long term, ADP's stock is expensive right now at a 25 P/E.

Tyco no longer seems right for the list because its growth prospects are mediocre. Nonetheless, investors have bid up the stock during the past year because the company planned to split into three pieces to realize hidden value. Now that the split-up has been completed, it's unclear what would increase the share price a lot further.

To replace Tyco, I've chosen Corning, the leading maker of optical fiber. During the tech wreck, Corning's stock collapsed from more than $100 a share in 2000 to less than $2 in 2002. Reason: The massive oversupply of optical fiber that was already installed stifled demand. But that surplus has now been largely absorbed, thanks to streaming video and other recent online services that require enormous bandwidth capacity.

Corning has two other businesses that seem like great 21st-century opportunities. The company is the leading maker of liquid-crystal glass used in displays for computers and flat-screen televisions. Through part ownership of Dow Corning, the company is also a major supplier of silicon products and other materials used in solar panels. Both businesses are growing faster than 30 percent a year. The stock is fully priced at an 18 P/E, but Corning's earnings are expected to grow at a long-term rate of 18 percent - which should light up any stock portfolio.