5 Top Tweeners

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

Neither up-and-coming superstars nor dominant veterans, tweeners are poised precariously in between. They're not as hot as they once were, and they're vulnerable both to young upstarts and old stalwarts. But they've honed their skills enough to remain a force to be reckoned with.

The stock market has plenty of tweeners. 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 almost was. That's the problem -- investing in tweeners can be dangerous and exceptionally profitable. By picking his winners well, David Gardner 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 are the latest contenders.

Company

CAPS Rating

5-Year Growth Estimate

Energy Conversion Devices (NASDAQ:ENER)

***

44.3%

Riverbed Technology (NASDAQ:RVBD)

***

38.6%

Electronic Arts (NASDAQ:ERTS)

***

23.6%

Network Appliance (NASDAQ:NTAP)

***

18.8%

Cabela's (NYSE:CAB)

***

15.1%

Sources: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations -- merely candidates for further research.

Of these, I almost went with Riverbed Technology. For four straight years, trade publication InfoWorld has recognized Riverbed as having the best technology for accelerating applications and data to remote offices over wide-area networks. Think of bridging a network between headquarters in New York and a branch in Shanghai, and you'll have a sense of what Riverbed does.

And speaking of networks ...
Of course, these types of networks operate best when they have plenty of storage available. That's where Network Appliance comes in. A maker of network-ready data-storage systems, this aptly named company is a very cheap growth stock.

Consider the numbers. According to Capital IQ (a division of Standard & Poor's), Network Appliance trades for just 15.4 times its projected 2008 earnings, resulting in a 0.82 PEG ratio. Here's why that matters: EMC (NYSE: EMC  ) , a larger but slower-growth peer, trades for more than 19 times its expected income for 2008. Doesn't seem quite fair, does it? Not to me. I'll be adding shares of Network Appliance to my CAPS portfolio today.

But that's my take. What would you do? Would you buy Network Appliance 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.


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