5 More Growth Stocks Stuck in the Middle

If you've ever sought to get seriously rich from stocks, then you've owned a tweener.

A tweener, dear Fool, is like your pal Chuck. Still a great athlete, Chuck no longer rules the hardwood with his 40-inch vertical leap. He's become what we sports addicts call a gamer. He passes more. He's developed a nice shot from the corner. And, though he doesn't dunk as much, or as spectacularly, as he once did, Chuck is still a force in the paint.

What we fans don't know is how long Chuck will stay in the starting lineup. Chiseled veteran Abe has a wicked hook shot that won't quit. And Larry, the little guard whose hip-shaking moves smoke defenders, has the makings of a future superstar. Both are vying to cut into Chuck's minutes on the floor.

In Foolish parlance: Chuck is a tweener, Abe is a Rule Maker, and Larry is a Rule Breaker.

Growing up is hard to do
The stock market has plenty of Chucks. They'll either create billion-dollar fortunes as they come to dominate industries, as Cisco, Microsoft, and Google have, or they'll be destroyed in the process, as Gateway was.

Therein lies the problem. Investing in tweeners can be dangerous andexceptionally profitable -- the trick is picking your winners well, as David Gardner has. He produced nine years of 20% average returns hunting for misunderstood multibaggers in the making. His team at Motley Fool Rule Breakers continues the tradition today.

Let's have the list
You, too, can join in the effort, thanks to Motley Fool CAPS. Each week, we'll use the database to find three-star stocks that are expected to boost earnings by at least 15% annually over the next five years. Here is today's list:

Company

CAPS Rating (out of 5) 

5-Year Growth Estimate

Energy Conversion Devices (NASDAQ:ENER)

***

35%

Medarex (NASDAQ:MEDX)

***

30%

Green Mountain Coffee (NASDAQ:GMCR)

***

25%

Dolan Media (NYSE:DM)

***

18.7%

MPS Group (NYSE:MPS)

***

16%

Sources: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research. But of these five, it's hydrogen battery maker Energy Conversion Devices that interests me most.

I know that sounds crazy to hyperventilating value investors. I can hear you screaming in the distance: It's got no profits! Negative returns on equity! Almost 30% of the shares are sold short! Hydrogen's last big moment in the spotlight was the Hindenburg!

To which I respond: true, true, true, and ... I'm not so sure.

But I digress. Ever since management began buying shares, I've been a cautious bull when it comes to Energy Conversion. A new CEO helps, but so does a rapidly expanding royalty revenue stream. (ECD realized a 53% gain in royalties in its just-completed third quarter.)

To be fair, Energy Conversion's gross margin fell and its cash burn rate increased in Q3. Yet the balance sheet remains sturdy from what I can tell: $161.6 million in cash and investments versus no discernable debt.

What's more, with oil nearing $100 a barrel, it's more likely than ever that ECD and renewable-energy peers such as SunPower (Nasdaq: SPWR  ) and First Solar (Nasdaq: FSLR  ) , both of which were upgraded by Lazard Capital Markets yesterday, will see an increase in government and civilian contracts.

Intrigued? Do your own due diligence and then check in with thousands of other investors at CAPS. And, if you'd like, add your own commentary. You'll be helping your fellow Fools and testing your ideas at the same time. Click here to get started now; the service is 100% free.

See you back here next week for five more growth stocks stuck in the middle.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 540028, ~/Articles/ArticleHandler.aspx, 10/26/2014 3:23:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement