Here's a quick quiz: What do Yahoo! (NASDAQ:YHOO), Starbucks, and Adobe Systems (NASDAQ:ADBE) have in common? Besides being killer stocks, they all prospered by pursuing green fields -- markets that were either nonexistent or largely untapped before their arrival.

Instead of squaring off against competitors in crowded markets, these companies decided to blaze a trail all their own. Yahoo! formed around the idea that people would need a simple and easy guide to help them experience the World Wide Web. Starbucks pioneered the premium coffee business, contrary to the established institution of low-end coffee. And Adobe was an early pioneer in making tools to easily turn information on a computer screen into print documents.

Investors looking in green pastures have similarly prospered: Putting just $10,000 behind Yahoo! at its Nasdaq debut in 1996 would have you sitting on more than $210,000 today. Spotting Starbucks' open market in the beginning would have you enjoying a 50-bagger with that latte. And for Adobe, early investors have earned nearly 140 times their money since its IPO two decades ago.

Sniffing grass
Looking for green field stocks is a different game -- analysis is tilted much more toward trends in developing industries as opposed to competitive analysis in a mature market. The secret to success here is twofold:

  1. Properly identifying a viable, emerging market.
  2. Backing the leader in the space.

With relatively few companies defining their own markets, part two can be easy, since the list of players is often small. For instance, back in the days when the green field of computers was just emerging, Intel (NASDAQ:INTC) was one of only a few companies focusing on semiconductors. Picking the green field leader of silicon memory and circuits essentially came down to either Intel or chief rival Advanced Micro Devices (NYSE:AMD). (For those keeping score, Intel has returned nearly 50 times an initial investment, while AMD only three times.)

Similarly, the booming computer market at the time opened a green field of software operating systems and tools. Microsoft (NASDAQ:MSFT) was one of only a few companies capable of meeting the tremendous demand for software products. Investors with vision in this green field now go by a different name: retirees.

While these examples showed huge payoffs in hindsight, not all green fields prove profitable. WPT Enterprises (NASDAQ:WPTE), for example, has so far demonstrated that the recent rage around poker tournaments is not enough to sustain profitable growth. And the company many would consider the undisputed champ of the digital video recording market, TiVo (NASDAQ:TIVO), has similarly struggled to yield positive returns to investors.

Yet even with the pitfalls, finding lucrative green fields can be easier than you think. David Gardner and his team of Rule Breakers analysts have earmarked several developing niches with tremendous profit potential. Nanotechnology is a market where a few radical companies are pushing the boundaries with microscopic devices. David has highlighted two promising stocks here, and subscribers have learned how to spot other profitable green fields.

Navigating an open field
My favorite green field, which I jumped into a few years back, is the Global Positioning System (GPS) marketplace. Once only a military tool, precise-position technology has blossomed to find its way into a litany of commercial applications, including car navigation, outdoor recreation, and flight instrumentation.

The company I've pegged as the leader in GPS devices is Garmin, a stock that has soared nearly fivefold from its December 2000 initial public offering. A company working in another niche of the GPS market whose stock has increased nearly 200% in the past year is SiRFTechnology, a GPS chip maker. Yet even after almost two decades, companies supplying the GPS market have only scratched the surface. I see this market as not only immature but also capable of supporting many more companies that exploit profitable niches involving GPS.

Fielder's choice
So if the terms GPS, nanotubes, and antisense technology aren't part of your regular vocabulary, there's a good chance your portfolio is missing some green fields. Understanding wild new technologies is not a prerequisite for investing in green fields, but limiting your vision to mainstream, established markets could make you overlook the next great 50-bagger. Taking a free 30-day test-drive of the Motley Fool Rule Breakers service will help you see what you may be missing.

This article was originally published as "Green Fields Grow 40-Baggers" on Feb. 27, 2006. It has been updated.

Fool contributor Dave Mock has gone green and owns shares of Starbucks, Intel, and Garmin. A longtime Fool, he is also author of The Qualcomm Equation . Starbucks, TiVo, and Garmin are Stock Advisor recommendations. Intel and Microsoft are Inside Value recommendations. The Fool has adisclosure policy.