Here's the rub. I've got a new stock recommendation ... but I can't tell you what it is. The pick will be going out to Motley Fool Rule Breakers newsletter subscribers tonight, and to those who opt for a free 30-day trial subscription today. However, since I don't want to leave you empty-handed, I'll share how I narrowed down the stock-selection process, and get into some of the previous picks that I can definitely tell you about.
I love stocks. I crave financials. I also love a good story stock. So for me, there's nothing quite as fulfilling as finding that perfect equity sandwich: an upstart growth stock with a great tale to tell and the financial fortitude and fundamentals to back it up.
Me and my big mouth
I've been part of the Rule Breakers team since its inception two years ago. In the 1990s, I was one of the analysts providing regular recaps on David Gardner's original Rule Breakers portfolio. It was pretty amazing to watch -- and learn -- from David's market-defying picks. I was also, I'm ashamed to admit, a bit of a skeptic. I was an Amazon.com (Nasdaq: AMZN ) shopper and an eBay (Nasdaq: EBAY ) bidder when David singled out both companies as real-money investments. I had my doubts about Amazon's ability to expand margins, and at the time, I figured that eBay would only appeal to geeks like me or diehard collectors. But then I came around. And so did the rest of the world.
That's why I jumped at the chance to join David and a team of worthy analysts in transforming the Rule Breakers investing philosophy into an interactive subscriber service. I've relished teaching others what David has taught me over the years. I've relished going out on the limb, laying my name on the line for some of the monthly selections.
As one of the stock-pickers on the Motley Fool Rule Breakers team, I've been both fortunate and humbled. I recommended our best-performing picks of 2004, and I've done the same so far in 2006 with Steiner Leisure (Nasdaq: STNR ) and The Knot (Nasdaq: KNOT ) , up 73% and 59%, respectively. I'll tell you how I unearthed each opportunity. I owe you that much.
However, I should also point out how I was the laggard of the team in 2005. Four of the two dozen picks from last year have gone on to more than double, but I didn't have a hand in any of them. That was David Gardner, Charly Travers, Tim Beyers, and David again, scoring nicely with the multibaggers.
How I knew that Steiner would be finer
Living in Miami, I have grown up with the cruise industry in my backyard. It's a sector so enriching that Carnival's (NYSE: CCL ) Mickey Arison was afforded the ability to own an NBA team. His Miami Heat aren't doing too shabbily this year, right?
I'm a fan of Carnival as well as its higher-end rivals, but I recognize the cyclical lulls. The rise and fall of fuel prices weighs heavily on margins. Cruise ships are generally booked well, though off-season periods and tourism-jarring events spark deep discounts to fill up the cabins.
Is there a way to play on the popularity of cruising without the hiccups? Hello, Steiner Leisure! Most of the company's revenue comes from running the shipboard spas on more than a hundred of the largest cruise ships in the industry. As a tenant, Steiner has the good fortune of working over full ships without dealing with the discounting headaches or rising energy prices.
Ships love Steiner because it has a fleet of well-trained specialists and the seasoned know-how to offer a quality branded experience. A major cruise line once tried its hand at running its onboard spas itself; it failed badly and returned to Steiner.
As the cruise industry reached out to younger audiences, new domestic ports, and more male passengers over the past two years, Steiner remained a consistent grower and a prolific stock to own.
Tying The Knot
Earlier this year, I ran TheKnot.com past David. I was not a fan of Internet-based lead-generation outfits (with their paper-thin moats), but this one was different. More than just a cookie-cutter portal to pitch wedding singers and banquet hall to prospective newlyweds, The Knot was rich in content -- and a killer brand.
TheKnot.com was more than just a popular destination for young 'uns about to spend tends of thousands on that special day. It also had content-distribution deals with other websites, as well as print and television affiliations -- the perfect strategy when it comes to brand ambassadorship.
The company caters to the perfect audience. Now that it's acquired TheWeddingChannel.com, it has the pioneer in online bridal registries to fortify its already-strong business. It's also grown to include dating sites and newlywed sites, stretching further into the courtship cycle.
Banking on another hit
My pick this month has many of the features that I look for in an investment. It's a quality business that can be explained on the back of a cocktail napkin. Though I am willing to make exceptions to profitability if the top-line growth has been sharp and stellar, this one happens to be squarely in the black. That may be why Steiner and The Knot have held up so well in this nervous market. We'll see if that approach pays off this time, too.
The stock I've selected for our July issue isn't perfect, but I don't mind a few warts here and there, especially if they creates an attractive entry price. That's certainly the case with tonight's pick.
The Rule Breaker approach may serve your own portfolio well. Look around you. That stock that you dismissed months ago as overpriced? It may be a screaming bargain these days. If that great stock deal happens to already be in your portfolio, maybe it's time to buy some more. The market may not bounce back tomorrow, or even next month, but historically speaking, Wall Street eventually regains its winning ways. So let's not worry about my next stock pick; yours is more intriguing. Ready for a little due diligence?
It's not about being lucky. It's about being smart and persistent. Folks who are sitting on huge gains after buying Google (Nasdaq: GOOG ) and Apple (Nasdaq: AAPL ) a couple of summers ago didn't just luck out. They found quality growth stocks that were leading the market in search advertising and digital music, respectively, and they held on for the ride. The past few weeks have been cruel to many great companies, but the paper profits are still substantial if you're a visionary investor with the luxury of buying in early.
We'll see if I'm right this time. We'll see if you're right this time, too. Another Steiner? Nothing could be finer. Another The Knot? Why not? Another opportunity? You bet.
You can join Rick, David, and the rest of the Rule Breakers team (as they seek to uncover promising growth stocks) with afree 30-day guest passthat will grant you access to the many interactive features of the service, including tonight's new monthly issue. The Knot and Steiner remain active picks, while Amazon and eBay have been longtime selections for Motley Fool Stock Advisor.
Longtime Fool contributor Rick Munarriz isn't a tease. He'll tell you up front that he, lamentably, doesn't own any stocks mentioned in this story. The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.