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 superstar 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 (out of 5)

5-Year Growth Estimate

E-House Holdings (NYSE: EJ  )

***

44.0%

Janus Capital (NYSE: JNS  )

***

20.9%

Qualcomm (Nasdaq: QCOM  )

***

18.9%

Aeropostale (NYSE: ARO  )

***

16.8%

eBay (Nasdaq: EBAY  )

***

16.1%

Sources: Motley Fool CAPS, Yahoo! Finance.

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

eBay has tempted me for years. Any business that creates a subculture of millionaires is too sexy to ignore. Actually, make that "was" too sexy to ignore. When CEO Meg Whitman kissed the top spot goodbye, it was a huge turn-off for investors, including yours truly.

Janus Capital, meanwhile, has lost too many top fund managers to be of interest to me. (However, over the long haul, I still believe it will be one of the top fund shops in the biz.)

Postulating Aeropostale
Of the three that remain, you might not expect a retailer to emerge as my top pick. Retail, as an industry, has performed terribly.

And worse days may lie ahead. Any protracted decline in consumer spending resulting from a recession would have a widespread impact on most of today's mallrats.

Yet despite all that, Aeropostale appears to be pretty well-positioned. December same-store sales improved by double digits and led to higher fourth-quarter guidance. Few peers short of Guess? (NYSE: GES  ) can make a similar claim.

Then there's the balance sheet -- it's stellar. Aeropostale has more than $122 million in cash and no debt, which should provide a cushion if a recession really is in order. Consider, too, that this business has been cash-flow positive since the waning days of the last recession, in February 2002.

Add it all up, and I see this as a business worth adding to my CAPS watch list. But that's my take. What about you? Would you buy Aeropostale 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 top tweeners.


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