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The most recent earnings reports have been better than expected for the quarter, yet the market has been extremely volatile. There has been a lack of direction for stocks both long and short, and this has hurt earnings for several investors. In a volatile market it is important to separate the stocks that are a bargain and those that are just "cheap."

When trying to add true value to a portfolio, it is important to choose stocks wisely, and I have a simple formula for this. First, I like to choose stocks from different sectors because this offers a great hedge against risk and market fluctuations. Secondly, I like to choose stocks that have been beaten down because of the current cyclical environment, but are solid companies in the long run. Finally, my third formula for success is a company that has strong fundamental data, no debt, or a vision that I believe the company can profit from in the future. I have found four stocks that I feel are growth stocks, and should not be ignored:

Caterpillar (NYSE:CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines and Financial Products. This company operates in the Farm and Construction Machinery industry, and is currently trading at $88.25, and has a rock solid foundation. The one-year analyst price target is $114.5, which represents a 29.75% upside potential. This company has a whopping current EPS of 6.54 and P/E of 13.60 and pays a current 2% dividend yield, better than any bank rate and arguably safer. Despite the slowdown in housing and the economy CAT is still growing, and just a few days ago opened a new 270,000 square foot facility in North Carolina. It currently has a ROA of 5.83% and ROE of 35.21% with a four-star S&P rating. I think this is a position to have for any long-term portfolio.

Federated Investors, Inc. (NYSE:FII) together with its consolidated subsidiaries (Federated) is a provider of investment management products and related financial services. Federated Investors is one of the largest investment managers in the United States, managing $351.7 billion in assets as of Sept. 30, 2011. With 134 funds, as well as a variety of separately managed account options, Federated provides comprehensive investment management worldwide to approximately 4,800 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. The current market price is $15.02 with a one-year analyst price target of $18.88. This represents a 25.7% upside potential and this does not include the current dividend yield of 6.3%. The company's net margin has been higher than its industry average for each of the past five years. Based on Forward PEG, FII currently trades at a 31% discount to its Investment Management and Fund Operators Industry peers and a 30% discount based on trailing P/E. FII has growing money fund assets and huge growth opportunities within the line of business. FII has an EPS of 1.55 compared to the industry average of 0.19 and EBITDA is $ 300.86M compared to the industry $ 26.51M.This represents an undervalued corporation that is set up for growth in 2012.

Hewlett Packard Company (NYSE:HPQ) is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. The current market price is heavily discounted at $26.8 with a one-year price target of $31.13. This represents an 16.16% upside potential, and this does not include its 1.8% dividend yield. Hewlett Packard recently announced it was getting out of the PC business (its biggest revenue generator). This news was not well received by the market, and shares fell to as little as $22 (March 2009 lows where around $26). Although this news was not taken very well at first, it has posed a perfect opportunity for investors. While the selloff makes sense on the surface, this is a case where the market may have overreacted, not realizing there's a flipside to this coin. The PC business was a very low-margin operation, and the top and bottom lines for it have been struggling for a while. Also, according to the analysts, HPQ has a strong brand, a loyal customer base, and is likely the largest installed base of enterprise and consumer customers. I feel this stock has a huge growth potential at the current price.

Enerplus Corporation (NYSE:ERF) operates as an independent oil and gas producer. The company's property interests are located in western Canada in the provinces of Alberta, British Columbia, Saskatchewan and Manitoba, as well as in Montana, North Dakota, Pennsylvania, Maryland and Delaware in the United States. Enerplus operates a land base of approximately 420,000 net acres. The current market price is $23.74 with a one-year analyst price target of $28.32. This represents an 19.29% upside potential. The one-year upside potential, however, does not include yield from dividends that add up to 8.5% yearly. ERF has an EPS of 4.21 and P/E of 5.72. With oil-and-gas investments, you’re exposed to fluctuating commodity prices, but ERF does its best to mitigate that risk by maintaining one of the strongest balance sheets of its competitors. In addition, Enerplus carries on an active exploration and acquisition program to replace the oil and gas it pumps out of the ground, which makes this company a safe bet with a steady stream of income and no sign of the company going anywhere.

Source: 5-Star Picks For Income Investors