5 More Unloved Growth Stocks

Ah, the joys of skepticism.

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

Hitting just one of these home runs can make all the difference to your portfolio. Just ask David Gardner, who bought Amazon.com at a split-adjusted price of $3.24 a share in 1997. He's up almost 2,300% since.

Stocks like Amazon helped David to produce nine years of better-than-20% average annual returns in the real-money Rule Breaker portfolio, even while suffering stinging losses from Guitar Center and 3Dfx, among others.

Let the haters be your friends
David continues this home run investing tradition today at Rule Breakers. You can follow the moves of his rebel alliance with a free trial to the service. Or, if you prefer to pick your own stocks, there's Motley Fool CAPS, a 100% free stock-picking community whose 83,000 participating investors rate stocks on a scale of one to a maximum five stars. Some 5,400 rated companies are in the database right now.

How can this help you? Each week, using CAPS, we'll search for one- and two-star stocks that have at least 5% of their available shares sold short, but which are expected to grow their earnings by no less than 15% over each of the next five years.

Let's have the list
Here are today's unloved growth stocks:

Company

CAPS Rating

Short Interest

5-Year Growth Estimate

The Medicines Co (NASDAQ:MDCO)

**

9.40%

43.7%

Concur Technologies (NASDAQ:CNQR)

**

10.80%

27.3%

Interwoven (NASDAQ:IWOV)

**

5.70%

25.0%

Crocs (NASDAQ:CROX)

**

22.60%

25.0%

RealNetworks (NASDAQ:RNWK)

**

8.40%

23.0%

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.

At first, I was tempted to go with funky clog retailer Crocs. With each passing day, it's behaving more like Deckers Outdoor (Nasdaq: DECK  ) did before it staged a multibagger recovery.

Interestingly, that seems to be precisely what Wall Street is calling for. Analysts project 25% growth each year over the next half-decade, giving Crocs a very reasonable 0.70 PEG ratio.

Weaving better returns
But I'll take Interwoven. A content management expert that was also a budding tweener, Interwoven this week reported 17% top-line and 146% bottom-line growth in its fourth quarter.

Higher margins deserve some credit for that big bottom line. Gross margin improved by 373 basis points; operating margin rose 153 basis points. And Interwoven boasts a debt-free balance sheet with $157 million in cash, equivalents, and short-term investments -- equal to roughly one-quarter of its market value.

Yet this remains a two-star stock. I can't see how that's reasonable. Nor, apparently, can our best CAPS investors. Seven of the nine All-Star stock pickers who've rated Interwoven believe it will beat the market. I agree, and I've added the stock to my CAPS portfolio as a result.

But that's my take. What's yours? Would you buy Interwoven 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.


Read/Post Comments (0) | Recommend This Article (4)

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: 568656, ~/Articles/ArticleHandler.aspx, 9/23/2014 10:27:41 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