5 More Unloved Growth Stocks

Ah, the joys of skepticism.

We rebel investors at Motley Fool Rule Breakers know that multibaggers in the making, while not often cheap by the numbers, are always misunderstood. The extraordinary skepticism they stand up to 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 more than 1,800% since.

It's stocks such as Amazon that 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 85,000 participating investors rate stocks on a scale of one to five stars. More than 5,300 rated companies are in the database right now.

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

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

Company

CAPS Rating

Short Interest

5-Year Growth Estimate

TomoTherapy (NASDAQ:TOMO)

**

13.00%

42.0%

Bankrate (NASDAQ:RATE)

**

42.60%

33.2%

Emeritus (AMEX:ESC)

**

6.20%

30.0%

Amylin Pharmaceuticals (NASDAQ:AMLN)

**

16.10%

22.4%

Novellus Systems
(NASDAQ:NVLS)

**

11.10%

15.0%

Sources: Motley Fool CAPS, Yahoo! Finance.

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

I'm tempted once again to go with Rule Breakers recommendation Bankrate. Why didn't I, then? Financial services could be one of the worst sectors to invest in right now. There's simply too much evidence that the credit markets will get worse before they get better.

The war we must win
My preference is to own growth stocks that are timeless. Businesses that, no matter what economic conditions are, attract loyal customers. Starbucks is like that. So is General Electric (NYSE: GE  ) . TomoTherapy, today's top choice, may fit that description before long.

Why? Cancer. According to the American Cancer Society, more than 1.4 million Americans were afflicted with the disease last year, and 550,000 died. Cancer remains the second-leading cause of death.

Those are awful statistics, but they help to explain why there's an abundance of funding to develop drugs and technology that can be useful in the fight against cancer. TomoTherapy has such a technology.

The company's Hi Art product enables more precise radiation therapy for treating cancerous tumors, similar to what Varian Medical (NYSE: VAR  ) provides with its RapidArc system.

And yet TomoTherapy, a faster grower than Varian, trades for roughly the same multiple to projected earnings. Many top investors with deep pockets see that as unfair. Will Danoff of Fidelity Contrafund (FCNTX) appears to be one. Contrafund owns nearly 3% of TomoTherapy as of this writing.

But that's one investor's take. What's yours? Would you buy TomoTherapy 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 (2) | Recommend This Article (5)

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.

  • Report this Comment On November 13, 2009, at 9:27 PM, chopchop0 wrote:

    TOMO is a fool's bet. Varian Trilogy with Rapidarc provides a more versatile radiotherapy/radiosurgery solution, and allows for non-IMRT treatment.

    Tomotherapy treatments, while having the ability to potentially be more conformal, also take longer to deliver.

    With capital budgets being slashed left and right, most centers are going to want to go with one machine that can do everything.

    IMO, that machine is either a Novalis TX, a varian trilogy with rapidarc, or an elekta synergy S

  • Report this Comment On November 13, 2009, at 9:29 PM, chopchop0 wrote:

    TOMO is a fool's bet. Varian Trilogy with Rapidarc provides a more versatile radiotherapy/radiosurgery solution, and allows for non-IMRT treatment.

    Tomotherapy treatments, while having the ability to potentially be more conformal, also take longer to deliver.

    With capital budgets being slashed left and right, most centers are going to want to go with one machine that can do everything.

    IMO, that machine is either a Novalis TX, a varian trilogy with rapidarc, or an elekta synergy S

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Related Tickers

12/31/1969 7:00 PM
TOMO.DL $0.00 Down +0.00 +0.00%
TomoTherapy, Inc. CAPS Rating: **
AMLN.DL $0.00 Down +0.00 +0.00%
Amylin Pharmaceuti… CAPS Rating: **
ESC $0.00 Down +0.00 +0.00%
Emeritus Corp CAPS Rating: *
GE $26.13 Up +0.21 +0.81%
General Electric C… CAPS Rating: ****
NVLS.DL $0.00 Down +0.00 +0.00%
Novellus Systems,… CAPS Rating: **
RATE $11.25 Down -0.67 -5.62%
Bankrate CAPS Rating: *
VAR $82.74 Down -0.88 -1.05%
Varian Medical Sys… CAPS Rating: *****

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