5 More Unloved Growth Stocks

Ah, skepticism, how I love thee.

We rebel investors at Motley Fool Rule Breakers believe the multibaggers in the making, while not often cheap by the numbers, are always misunderstood. As such, they face extraordinary skepticism, which, in turn, makes them excellent value stocks.

More are out there. Each week, right here in this column, we'll hunt them down. Grab your keyboard.

What one stock can do for you
Really, it's worth your time. One home run stock can make all the difference to your portfolio.

Just ask David Gardner, captain of the good pirate ship Rule Breakers, who bought Amazon at a split-adjusted price of $3.24 a share in 1997. He's up more than 2,700% since.

That helped him to overcome stinging losses from Sirius Satellite Radio, 3Dfx, and others to put up nine years of better-than-20% average annual returns as the leader of the real-money Rule Breaker portfolio.

Let the haters be your friends
Today, David and his team still seek misunderstood growers. You can, too, with the help of our completely free-of-charge Motley Fool CAPS investor-intelligence database, which currently contains information on more than 5,300 stocks.

CAPS applies user input to rate stocks from one star (low) to five (high). Using CAPS, we're once again going to search for one- and two-star stocks that have at least 5% of their available shares sold short, but are expected to grow their earnings by no less than 15% over each of the next five years.

Let's have the list
Now, with that preamble behind us, here are five more unloved growth stocks:

Company

CAPS Rating

Short Interest

5-Year Growth Estimate

First Solar (NASDAQ:FSLR)

**

8.5%

56.3%

Lazard (NYSE:LAZ)

**

7.8%

15.0%

Crocs (NASDAQ:CROX)

**

18.8%

26.6%

Applied Micro Circuits (NASDAQ:AMCC)

**

7.3%

20.0%

99 Cents Only Stores (NYSE:NDN)

**

24.1%

18.7%

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.

Sun-drenched stocks such as Evergreen Solar and Suntech Power (NYSE: STP  ) have captured my attention before, and few are better than First Solar, which fellow Fool and energy writer Toby Shute has recently taken a shine to.

After burning through $14 million over the same period in 2006, First Solar produced $106 million in cash from operations from January to September of this year. Talk about a turnaround.

Time to take a bite out of Crocs?
The trouble with First Solar is that investors already know the story. It's been an eight-bagger over the past 52 weeks, easily besting the S&P 500 and Suntech alike.

I'll buy expensive stocks when the situation calls for it, but I prefer the misunderstood multibaggers in the making. Stocks like that are best bought when skepticism runs high.  Now could be such a time for Crocs.

Hear me out on this. Over the summer, I said that Crocs was looking a lot like Deckers Outdoor (Nasdaq: DECK  ) and that investors should expect a 50% haircut based on valuation and inflated expectations. The razor finally appeared in late October.

And I'm liking the slimmer, trimmer Crocs, which now trades for 17 times next year's earnings, resulting in a low 0.64 PEG ratio. That's hard to resist.

What's worrisome to others is the inventory story. Crocs saw inventory rise 297% in its latest quarter, easily outpacing sales growth. I'm less concerned about this, because we knew the YOU by Crocs women's line was in development. An inventory buildup in advance of the YOU by Crocs launch was inevitable, but it's something to keep an eye on going forward.

Finally, Crocs' management appears to be more enthusiastic about the company today than it has been in years past -- CEO Ron Snyder, in particular. Snyder acquired 38,935 shares on Nov. 5 via options, but in a new twist, he's holding rather than selling those shares.

That's nowhere near as bullish as seeing Snyder or any executive buy outright, but it does signal a shift in the parachute-wielding management team at Crocs' Niwot, Colo., headquarters. I've added the stock to my CAPS watch list as a result.

But that's me. What would you do? Would you buy Crocs at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

See you back here next week for five more unloved growth stocks.


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