Got Growth?

Fool co-founder David Gardner is a risk-taker. And his investment style reflects that.

He's focused on Rule Breakers -- companies that through new products or innovations subverted the established rules and fundamentally changed the way business is done. Just think of any game-changing business or product over the past 20 years. Charles Schwab (NYSE:SCH) and the discount broker? Check. Nike (NYSE:NKE) and a gas-filled plastic membrane in the heel of your shoe? Check. Netflix (NASDAQ:NFLX) and no-late-fee DVD-by-mail movie rentals? Check. The list could go on and on.

Back in 1998 -- at the dawn of the Internet boom -- David and his brother, Tom, published a book called Rule Breakers, Rule Makers. The book offered two distinct but equally viable ways to find stock market opportunities. Tom focused on large, established companies with strong brand names, superior distribution networks, and other competitive advantages. Those companies, "Rule Makers," set the rules in their industries.

While Tom's investment strategy has evolved somewhat (he still seeks out competitive advantages, but he's decided that it's often best to do so among small-cap stocks), David's has remained steady. From the bull market of the 1990s to the slump of the early century to the flat market of today, David has continued to search for Rule Breaking companies.

Why? Because in the process of changing the world, they have the power to crush the market.

Reality check
But not all at once, and certainly not for the impatient Joe Oddlot out there. It might be contrary, but Rule Breaker investing has perhaps the longest time frame of any strategy.

Lessons from the Bard
One of the key attributes of successful growth companies is that they are first movers in an emerging industry. That's a huge advantage, and over the years, that attribute has led me to feast on the some of the best e-commerce operations in the land. As Shakespeare wrote in Henry IV, "Advantage feeds him fat while men delay."

You know the names: Amazon.com (NASDAQ:AMZN), Starbucks (NASDAQ:SBUX), and Rule Breakers recommendation Overstock.com (NASDAQ:OSTK). Although each of these stocks has made for a harrowing ride, all three are way ahead of the market since one year after their IPO.

This chart illustrates exactly why Rule Breaking investing is the strategy that relies most on a patient, buy-to-hold philosophy. The key is to buy shares of first movers in emerging industries and then let them run. Consider all of the pessimism surrounding Overstock.com right now. Is Patrick Byrne unfocused? Are recent inventory problems indicative of a company in trouble? The stock is down, but take a longer view. Through all of its difficulties, Overstock has been a market-crusher.

Get in early, get out late
We could very well be at the dawn of a new investing phenomenon -- international stocks. And many investors believe that enormous opportunity lies in China, particularly when it comes to the Internet. Remember Baidu's (NASDAQ:BIDU) IPO, when the stock jumped nearly 130% on its first day of trading? Although Internet usage has grown nearly 400% in China since 2000, only about 8% of the population is online. While the tech boom of the late 1990s was incredible, perhaps we ain't seen nothing yet.

If, that is, you can be patient. Baidu has come back from that incredible one-day IPO spike, and it will remain volatile. But check back in 10 or 20 years; that's the time frame Rule Breakers care about. If Baidu is still one of China's most popular and useful Internet pages when 1 billion Chinese are online, it could very well become an investment of mythic proportions.

David and his team have recommended two companies in the Rule Breakers newsletter service that are even better positioned to profit from China's Internet growth. Rather than make a bet on the sector via a mutual fund or ETF, the greatest rewards come from drilling down and finding the very best positioned companies the market has to offer. To date, one of these recommendations is up 20% and the other is down 50%, but both could be long-term winners for Rule Breaking buy-and-holders. Remember that the key is to find first movers in emerging industries.

Today's growers
That tactic has helped the Rule Breakers team beat the market by 15 percentage points in little more than a year (not incredibly meaningful given the timeline, but promising nonetheless). If you'd like to join thousands of subscribers in the hunt for tomorrow's ultimate growth stocks today, click here to take a 30-day free trial to Rule Breakers. You'll get instant access to all our research and our dedicated discussion boards without any obligation to subscribe.

There's never growth without growing pains, but with a patient eye on first movers in emerging industries, you can find all the growth you'll need.

Tim Hanson owns shares of none of the companies mentioned. Charles Schwab, Netflix, and Amazon.com are Motley Fool Stock Advisor recommendations. The Fool has a disclosure policy.