3 Growth Stocks Ready to Launch

Can you stomach a growth portfolio?

Small-cap growth stocks are far more volatile than anything that's in the S&P 500 index, but it's worth your while to strengthen your stomach. Why? Well, don't you want to be like the man who bought Motorola (NYSE:MOT) when it was a tiny radio manufacturer back in 1955 and never sold? He multiplied his money many, many times over, and that one experience -- and others like it -- helped him become one of the best investors of all time.

But you didn't need to be investing in 1955 to profit from Motorola's amazing growth. If you had bought the stock as late as 1980 and held, even through the company's turbulent recent years, the investment would still have brought you a return of more than 2,000%, turning $10,000 into $211,000.

Those types of returns are precisely why you should not only stomach growth stocks but also make them a part of your portfolio today.

The growth king
The Motorola man I mentioned is the famous Philip Fisher, and in 1958 he wrote Common Stocks and Uncommon Profits -- a timeless book for all investors. His greatest contribution to growth investing may be his 15 Points. Though they won't shield you from short-term volatility, these points will help you achieve incredible long-term returns.

Here's the short-short version:

1. Great growth stocks must take advantage of a substantial market opportunity to profit. That means they will be both "fortunate and able." Of course, being fortunate and able requires many things, including an excellent industry position, competitive advantages, prudent uses of discretionary dollars, efficient models, and superior sales forces.
2. Great growth stocks must have a balanced and transparent management team. A potential investor must be able to look at a company's leadership and believe that it has integrity, an ability to handle distress, and an insightful vision for the future.
3. Great growth stocks must have outstanding accounting and disclosure policies. Anything less than excellence is unacceptable.

How do these qualities translate to significant shareholder return? Examine Fisher's investment in steelmaker Nucor (NYSE:NUE) in the mid-1970s. This was a growth mover at the time that went from a relative pipsqueak to the second-largest American steel manufacturer by the time Fisher sold it.

Nucor embodied some of the very basic principles that Fisher espoused. For example, when many steelmakers were concentrating on volume and turnout, Nucor focused on implementing new technologies into its production methods, making each of its plants smaller, more efficient, and most importantly, more profitable. And today the company still looks like a little brother compared with big players like Arcelor Mittal (NYSE:MT).

But again, you didn't need to be Fisher to take advantage. Even if you had bought the stock in 1990, long after the company's initial move, you would have a fat 1,700% return on your hands. That's an 18.7% annual return, compared with the market's 8.8%.

The next wave
I'm an analyst on the Fool's Rule Breakers growth service, and I am constantly on the prowl for the best growth stocks out there. So with an eye on Fisher's most important lessons, here are three growth stocks I believe have tremendous potential:

Online jewelry seller Blue Nile has had a fantastic run lately and may look expensive, but I don't believe this run is close to over. Customers rave about the company's online showroom, and economies of scale are helping the company under-price traditional competitors. Even better, CEO Mark Vadon is exceptionally focused on the long term -- an outlook that will provide rewarding for investors.

Vehicle theft recovery specialist LoJack has a very intriguing market opportunity built on a financially sound foundation. Though it's got strong competition from the likes of General Motors' (NYSE:GM) On Star and other GPS providers, the company has proprietary technology built on an exclusive network monitored by police departments across the nation. For the long term, I expect LoJack to seriously leverage advantages in product functionality and its superior rates of property recovery.

Finally, Saba is an excellently priced consumer goods distributor that should continue to grow swiftly along with the Mexican economy. This is a bit of a dark horse -- it has pretty much zero Wall Street coverage -- but its financials reveal an efficient company with a wide market opportunity.

More where those came from
These are three of my favorite growth picks, and I look forward to seeing them flourish. Fisher's principles, which are elemental in my own approach, are also a big part of how we research at Rule Breakers -- where growth is king.

If these principles agree with your style, then I advise you to try the service free for 30 days without obligation. We're thumping the market average right now by nearly 11 percentage points. You can see all of our research and recommendations immediately upon joining, and there is no obligation to subscribe.

Rule Breakers analyst Nick Kapur does not own shares of any company mentioned. Blue Nile is a Rule Breakers and Hidden Gems recommendation. The Motley Fool has a disclosure policy.