5 Top Tweeners

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

Neither an up-and-coming star nor a dominant veteran, 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 andexceptionally 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

Cavium Networks (NASDAQ:CAVM)

***

35.0%

Blue Coat Systems (NASDAQ:BCSI)

***

31.0%

CME Group (NYSE:CME)

***

26.3%

Panera Bread (NASDAQ:PNRA)

***

18.9%

KongZhong (NASDAQ:KONG)

***

15.0%

Sources: Motley Fool CAPS, Yahoo! Finance, as of Feb. 8.

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

CME Group would be tempting if the Department of Justice wasn't thinking of undoing the hammerlock the parent of Chicago's Mercantile Exchange and Board of Trade has on the derivatives market.

Blue Coat Systems, too, is intriguing for its 0.70 PEG ratio, and its rising status as a challenger to Rule Breakers incumbents Akamai Technologies (Nasdaq: AKAM  ) in content delivery and Secure Computing (Nasdaq: SCUR  ) in digital security.

Could this Kong be king?
But I'll take my chances with KongZhong, which provides wireless services to mobile users in China and Southeast Asia.

Why? The math just doesn't add up. Cash and equivalents account for roughly 67% of KongZhong's market value as I write. It's as if investors believe there's virtually no chance of the company growing to be greater than it is today.

I can't see how that's fair. China is in the midst of sweeping telecom reform, as Foolish telco expert Dave Mock points out here. My guess is that these attempts to broaden access to telecom services in the People's Republic will create more opportunities for KongZhong and its peers.

CAPS investor JjcampNR apparently agrees. Here's how he pitched the stock in December:

Seems like they're SLOWLY turning things around. This one could easily go much lower, but I think the risk/reward is at a decent point right now. If KongZhong can find additional ways to make money and continue to grow their portals I think they'll do well. However until then, I wish they'd spend a bit less on their fancy annual reports and a bit more on finding that next income stream!

I agree. What about you? Would you buy KongZhong at current 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 tweeners reaching for the top.


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