5 More Growth Stocks Stuck in the Middle

Have you ever owned a tweener?

A tweener, dear Fool, is like your pal Chuck. Still a great athlete, Chuck no longer rules the hardwood with his 40-inch vertical leap. He's become what we sports addicts call a gamer. He passes more. He's developed a nice shot from the corner. And although he doesn't dunk as much, or as spectacularly, as he did, Chuck is still a force in the paint.

What we fans don't know is how long Chuck will be in the starting lineup. Chiseled veteran Abe has a wicked hook shot that won't quit. And Larry, the little guard whose hip-shaking moves smoke defenders, has the makings of a future superstar. Both are vying to cut into Chuck's minutes on the floor.

In Foolish parlance: Chuck is a tweener, Abe is a Rule Maker, and Larry is a Rule Breaker.

Growing up is hard to do
The stock market has plenty of Chucks. They'll either create billion-dollar fortunes as they come to dominate industries, as Cisco, Microsoft, and Google have, or they'll be destroyed in the process, as Gateway was.

Therein lies the problem. Investing in tweeners can be dangerous andexceptionally profitable -- the trick is picking your winners well, as David Gardner has. He produced nine years of 20% average returns hunting for misunderstood multibaggers in the making. His team at Motley Fool Rule Breakers continues that tradition today.

Let's have the list
You, too, can join the effort, thanks to Motley Fool CAPS. Each week, we use the database to find three-star stocks that are expected to boost earnings by at least 15% annually over the next five years.

Here is this week's list:

Bear in mind that this is not a list of recommendations. I offer these stocks as candidates for further research. And of these five, it's the Chinese real estate agency E-House that interests me most.

Why? It's a fast mover in a country of fast movers. Revenue grew 45% last year, up dramatically from 24% growth in 2005. Return on capital was 33% over the same period. By contrast, stateside peer ZipRealty (NASDAQ:ZIPR) was unable to produce positive return on capital last year.

Still, E-House is a recent IPO from the world's hottest market. Why should anyone believe this is a sustainable business? Foolish colleague Rick Munarriz points to a fast-growing market where lenders have proven conservative:

Homebuyers there weren't wooed with exotic "no money down" variable-rate mortgages, only to be forced to default as interest rates trickled higher and mortgages eclipsed home equity values. China's a designated driver to that kind of Lindsay Lohan binge. China requires homebuyers to initially put up 20% to 30% of a purchase as a down payment.

At CAPS, investor srains99 adds:

China's is one of the few safe havens from our subprime problems. On top of that, this company has explosive growth, strong financials, and very strong management. This only came back in price due to our market problems.

Intrigued? Do your own due diligence, and then check in with thousands of other investors at CAPS. And, if you'd like, add your own commentary. You'll be helping your fellow Fools and testing your ideas at the same time. Click here to get started now; the service is 100% free.

See you back here next week for five more growth stocks stuck in the middle.