Yes, it's football season. That means many of us will be watching the pro and college ranks grind it out on the gridiron in the pursuit of athletic glory. And you know, investing is a lot like that kind of fight. It works only if you have a game plan, and you have to make adjustments along the way depending on what you see taking place on the other side of the line.

As offense goes, I'm a fan of the vertical game. It's not that I mind a dust-bowl running attack or the short tosses of the West Coast offense. It's just that I think nothing is as exciting to watch as when a quarterback heaves the ball deep downfield for the big score.

The bomb. The deep post pattern. The Hail Mary. The completion rates on these long passes are low. A lot has to go right for the play to pay off. That's the "high risk" part of the equation. The "high return" comes in the form of the potential reception. The score. The touchdown. The butter-churn dance in the end zone.

Let's take a closer look at three companies that I believe have the legs to fly down the field, the arms to snag the pigskin out of the air, and the heart to keep going until they cross the goal line. They're a risky lot. Know that much.


I don't think anyone has ever used the words "Baidu" and "undervalued" in the same sentence. Baidu shot into the triple digits the moment it went public and has plenty to prove with its current $3.5 billion market cap. That may not seem like much of a bargain for a company that is looking to double revenues this year to just shy of $40 million.

However, Baidu is profitable. Its net margins of 17.6% during this past quarter will improve even further, like so many of China's other publicly traded companies.

As the world's sixth most-popular website, Baidu eats at the big boys' table. It is often compared to Google (NASDAQ:GOOG), since it's China's top dog in search. But the company's rather soft income statement tends to betray its gargantuan presence, and that's where way too many investors are miscalculating Baidu's earnings potential. They see meager results and forget that in China, more than 90% of the country does not go online. The per capita income is a paltry $1,300 a year.

Fine. Yet is Baidu really overvalued when it's priced at just $2.70 for every Chinese citizen? Consider Google. The company's share count nearly matches the population of the United States. Think Google is worth $300 for every stateside resident?

Sure, it's not a fair example. Google's reach obviously far exceeds our domestic borders. Nor has Google often been called cheap. But don't ignore Baidu and what is likely to be plenty of years of hypergrowth in the future. No, the stock isn't cheap by today's standards, but the patient passer knows that good things take time to open up down the field.

2. XM Satellite Radio (NASDAQ:XMSR)

I have been a fan of satellite radio for years. I am a satisfied Sirius (NASDAQ:SIRI) subscriber. I think that both XM and Sirius, like, are sorely misunderstood stocks. Investors see an $8 billion price tag on a company like XM, with no chance of turning a profit in the near term, and run the other way.

That's fine. By the time XM is consistently profitable, those same worrywarts will be glad to take your shares off your hands at higher prices. XM closed out its quarter ending in June with 4.4 million subscribers -- more than twice the 2.1 million paying listeners tuning in to XM a year ago -- and it's looking to close out the year with 6 million subscribers. If it can do that, we'll be talking about a user base that will have nearly tripled over an 18-month span of time. The company has also partnered with companies such as Motley Fool Stock Advisor selection Time Warner (NYSE:TWX) and Napster (NASDAQ:NAPS) for potentially lucrative deals that will grow the company's revenue streams beyond the subscriptions and sponsorships.

Beyond that, losses are narrowing, acquisition costs per new subscriber are declining, and revenue has been soaring. That all will come into play in an XM that, given the relatively fixed overhead of running a satellite radio business, is more financially potent than anyone thinks. In other words, every incremental user is worth even more to XM than the one that came before it.

3. Intuitive Surgical (NASDAQ:ISRG)

Ever since we recommended Intuitive Surgical to subscribers of the Rule Breakers newsletter service earlier this year, the company's shares have soared by 66%. This is really just the beginning, though, as more hospitals come around to ordering Intuitive's surgically proficient robotic-arm operating systems.

The company is already nicely profitable. The surgical systems are also wildly popular. All you need to know about Intuitive can be summed up in two lines on the company's latest income statement:

  • System sales revenue is up 57%.
  • Instruments and accessories revenue is up 108%.

Yes, folks keep ordering new systems. Nice. However, the growing state of add-ons and recurring revenue components means that the hospitals that have Intuitive Surgical systems are using them more often.

Your ball, your play
So where's your open receiver? None of these three companies may appear cheap using yesterday's gauges. Just two are profitable. The most inexpensive of the lot already commands a $2.5 billion market cap.

However, it's easy to see how things can pan out just right for all three companies. Baidu can come to monetize its popular dot-com properties with the same finesse of its stateside peers. XM can become the cornerstone of the country's most avid radio listeners, commanding an audience with primo demographics. Intuitive Surgical can continue to become an operating-room staple, here and beyond.

It's that kind of dreaming -- big, bold dreaming -- that drives our monthly Motley Fool Rule Breakers recommendations. Think you've got the arm to heave it that far? Want to step on the field, long enough for a free 30-day trial subscription, to see whether this is a field of green that you wouldn't mind playing in?

The ball is in your hands. Toss it with conviction.

Longtime Fool contributor Rick Munarriz is a football fan. He was at the Miami Dolphins' home opener over the weekend and was as surprised as anyone else at how good a team that went 4-12 last season can look on any given Sunday. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.