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 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

Gushan Environmental Energy (NYSE:GU)

***

50.2%

Chipotle (NYSE:CMG) (NYSE:CMG-B)

***

26%

Monolithic Power Systems (NASDAQ:MPWR)

***

22.5%

Clean Harbors (NASDAQ:CLHB)

***

20%

Cash America (NYSE:CSH)

***

16%

Sources: Motley Fool CAPS, Yahoo! Finance.

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

I like my choices, though. Burrito baron Chipotle has appeared in these digital pages before. I thought the stock was potentially cheap in December at $133 a share. Today, I'm salivating at the thought of getting in for around $116.

I also like Clean Harbors, which has been one of the best stocks of the past decade and, trading for 23 times current-year earnings, still looks like a decent deal.

Now that's horsepower
Neither gets my vote today, though. That goes to Gushan Environmental Energy, a Chinese maker of biodiesel that has all the markings of a top value stock. Here's why:

  • It participates in a massive market. (China.)
  • It possesses outsized growth potential. (50% annual estimated profit growth.)
  • It benefits from economic tailwinds. (A rising Chinese middle class.)

Here's how CAPS investor motownjay pitched the thesis last week:

China's market is growing ... duh. China has a buh-zillion people ... duh. These people will get jobs, produce goods for the world market. Those goods will have to get from China's interior to their ports and depots around the country. These good will travel by trucks and trains. Trucks and trains run on diesel. The company that can produce the cheapest diesel fuel the fastest will be a HUGE powerhouse in the world's most populous country. The company that is poised to do that is Gushan.

I'll add that, while solar power gets the headlines, biodiesel has a huge advantage in that its essential element is often waste. Recycled cooking oil, for example. I'm interested in any company that can help to profitably transform waste into fuel.

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