Dream Stocks for Internet Investors

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.

Motley Fool CAPS offers a variety of resources to aid Fools in finding tomorrow's leaders. Our 135,000-member community is full of investors helping each other beat the market.

We'll enlist CAPS to screen for Internet companies, then get the story behind some of its more highly rated stocks. CAPS' nifty screener will help us find stocks with:

• A market cap of at least $100 million
• A three-year revenue growth rate of at least 15%
• A price-to-earnings ratio of less than 25
• A gross margin of at least 50%

Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.

Opinions with the numbers
Below is a sample of stocks our screen returned. You can run this screen yourself -- remember, though, that your results may differ from ours as the market changes.

Data and star rankings from CAPS as of July 16.

GigaMedia
Although competitor NetEase.com (NASDAQ:NTES) reported higher first-quarter earnings, GigaMedia gave investors no such pleasure with reports of a drop in first-quarter profits. The company does believe, however, that it's hit the bottom of the downturn and remains optimistic about fundamentals of its industry going forward. It said it's also in final stages of discussion with two potential buyers for its poker and casino software business, which has seen weak revenue.

Many investors are focusing on the long-term growth potential of GigaMedia's online gaming business, where it had 33% sequential revenue growth in the first quarter and has several new games coming online this year like Electronic Arts' (NASDAQ:ERTS) Warhammer Online and NBA Street Online. With the growing online gaming industry, strong cash balance, and no debt, many CAPS members are excited about the future potential of the company. Today, more than 98% of the 2,186 CAPS members rating GigaMedia expect it to outperform the broader market.

ClickSoftware
Israeli-based workforce optimization software company ClickSoftware has been doing well so far this year with strong first-quarter revenue and solid booking of new business. The economy has affected some its target markets, but not surprisingly it has still seen demand from markets where its products help generate an immediate return on investment. It recently agreed to acquire web-based field service management solutions company AST, which will also extend its reach and customer base of small and large service businesses and offer the company more opportunities to profit. More than 97% of the 361 CAPS members rating ClickSoftware are bullish on it today.

CDC
While smaller than other Chinese internet companies like NetEase.com or Shanda Interactive (NASDAQ:SNDA), CDC has nonetheless seen a strong response to the launch of its newest game, Yulgang. Average daily revenue has increased 45%, and 78 million players are registered for the game. It will follow up this success with the launch of The Lord of the Rings Online in China in the second half of this year and preliminary test data show a very high activation percentage among users.  

Many CAPS members like what they see with the gaming unit of CDC, and investors recently bid up shares on the announced plan to make public shares of its enterprise-software business, potentially raising up to $62.4 million. Like Sohu.com's spinoff of its online gaming business Changyou (NASDAQ:CYOU), CDC games will offer investors a clearer picture between the gaming business and other areas. Many CAPS members see the company gaining traction and think its multi-continent reach of 160 million registered users provide great profit potential. In CAPS, more than 95% of the 825 members rating CDC expect it to outperform the S&P in the future.

Let 135,000 members be the jury
The collective wisdom of a huge pool of investors can help give context to a page of numbers from a stock screen -- but individual investors are still the best judges. Fools should always perform their own due diligence.

Run your favorite factors through the Motley Fool CAPS screener. It's totally free, and we think you'll like the results.