5 Top Tweeners

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 did, Chuck is still a force in the paint.

What we fans don't know is how long Chuck will be 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 and Microsoft have, or they'll be destroyed in the process, as Gateway was.

Therein lies the problem. Investing in tweeners can be dangerous and exceptionally 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:

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.

At first, I was tempted to go with Dick's Sporting Goods, whose dirty deeds are making headlines. But then I checked Dick's numbers and compared its performance with peers Big 5 Sporting Goods and Hibbett Sports. That's where it gets interesting: Both Big 5 and Hibbett produce higher returns on capital and equity than Dick's. Margins are better, too.

Perhaps Dick's isn't the first-round draft pick some Fools believe it should be?

NYMEX could be next
What's the worst investing call ever? How about failing to jump aboard the freight train that was Archipelago Holdings back in February 2005? That's when David Gardner added the stock that would become four-bagger NYSE Euronext (NYSE:NYX) to the Rule Breakers portfolio. Quoting from his write-up at the time:

Everything you ever thought about how the Internet can reduce costs, cut out middlemen, increase transparency, increase profits, etc., when applied to the stock market is generally true of Archipelago. In the same way that the Nasdaq competed successfully with the New York Stock Exchange by moving to a computer-based market system (away from human intervention), ArcaEx is today competing successfully with both of them by using the Internet as its trading platform.

Exchanges have been going gangbusters ever since. CME Group (NYSE:CME), parent company for both the Chicago Mercantile Exchange and the Chicago Board of Trade, is up more than 30% over the past 52 weeks and better than 80% since late 2005. 

Sterling returns like that aren't easy to come by. Thus my interest in NYMEX Holdings, which is a New York-based trading hub for all sorts of commodities -- from natural gas to coal to electricity.

You'd think a company so steeped in the building blocks of our economy would enjoy massive returns, as NYSE Euronext and CME have. Not so. NYMEX is down roughly 4% from its opening-day close on Nov. 17 of last year.

I can't see how that's fair. Returns on capital are on the rise and currently sit above 35%. CME, by contrast, only recently began earning positive returns on capital. And with a PEG ratio of 0.84 based on next year's earnings estimates, NYMEX appears priced on the cheap side of reasonable.

The possibilities intrigue me enough to add the stock to my CAPS watch list. Yet I'm just one Fool. What would you do? Would you buy NYMEX Holdings at today's prices? Let us know by signing up for CAPS now. It's 100% free to participate.

See you back here next week for five more top tweeners.