5 More Unloved Growth Stocks

Ah, the joys of skepticism.

We rebel investors at Motley Fool Rule Breakers believe the 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 more than 2,200% since.

It's stocks like 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 100,000-plus participating investors rate stocks on a scale of one to five stars. More than 5,600 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 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 (Out of 5) 

Short Interest

5-Year Growth Estimate

Alexion Pharmaceuticals (NASDAQ:ALXN)

**

20.91%

50%

Riskmetrics (NYSE:RMG)

**

6.59%

46%

Canadian Solar (NASDAQ:CSIQ)

**

30.85%

28.3%

Sally Beauty (NYSE:SBH)

**

8.67%

23.1%

Big Lots (NYSE:BIG)

**

37.44%

15.3%

Sources: Motley Fool CAPS; Yahoo! Finance; Capital IQ, a division of Standard & Poor's; and wsj.com

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

Not a bad list, eh? Alexion's drug Soliris is seeing huge demand that led to excellent first-quarter 2008 earnings and improved full-year guidance. RiskMetrics is a hot IPO. And Big Lots, while a good business, is up more than 75% since I singled it out as a prospective retail bargain in December.

A stock to stand on guard for your portfolio
Of the two that remain, sun worshipper Canadian Solar gets my top bid this week. Foolish compadre Toby Shute best explained why in this take, I think. Quoting:

As discussed in my piece on solar innovation, metallurgical silicon is actually polysilicon's relatively cheap raw material input. ... The difficult and expensive part involves refining the material to at least 99.9999% purity. But what if that process could be sidestepped? That's the promise of upgraded metallurgical (UMG) silicon, an area of development I'd previously overlooked. One start-up, CaliSolar, claims to be cranking out market-competitive, UMG-based solar cells in its lab. DARPA-backed Blue Square Energy is looking to commercialize a cheap solar cell involving a thin-film layer of pure silicon deposited on a UMG substrate, or base layer. ... Because Canadian Solar has experience with reclaiming silicon scrap, it may have a leg up on these aspirants.

Impressive, yes? Absolutely. Trouble is, Canadian Solar is among the 10 most shorted stocks right now. And for good reason: As with Solarfun (Nasdaq: SOLF  ) , Canadian Solar is seeing huge declines in gross margin and returns on invested capital.

By betting on UMG, Canadian Solar could reverse that trend, making today's investors -- who are acquiring shares for just 15 times next year's projected earnings -- a bundle of moola.

But that's my take. I'm more interested in what you think. Would you buy Canadian Solar 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.


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