Ah, skepticism, how I love thee.

We rebel investors at Motley Fool Rule Breakers believe the multibaggers in the making, while not often cheap by the numbers, are always misunderstood. As such, they face extraordinary skepticism, which, in turn, makes them excellent value stocks.

More are out there. Each week, right here in this column, we'll hunt them down. Grab your keyboard.

What one stock can do for you
Really, it's worth your time. One home run stock can make all the difference to your portfolio.

Just ask David Gardner, captain of the good pirate ship Rule Breakers, who bought Amazon (NASDAQ:AMZN) at a split-adjusted price of $3.24 a share in 1997. He's up more than 2,500% since.

That helped him to overcome stinging losses from Sirius Satellite Radio, 3Dfx, and others to put up nine years of better than 20% average annual returns as the leader of the real-money Rule Breaker portfolio.

Let the haters be your friends
Today, David and his team still seek misunderstood growers. You can, too, with the help of our completely free-of-charge Motley Fool CAPS investor-intelligence database, which currently contains information on more than 5,200 stocks.

CAPS applies user input to rate stocks from one star (low) to five (high). Using CAPS, we're once again going to search for one- and two-star stocks that have at least 5% of their available shares sold short but are expected to grow their earnings by no less than 15% over each of the next five years.

Let's have the list
Now, with that preamble behind us, here are five more unloved growth stocks:


CAPS Rating

Short Interest

5-Year Growth Estimate













ESCO Technologies (NYSE:ESE)




Genomic Health (NASDAQ:GHDX)




Sources: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.

At one time, digital video recording pioneer TiVo would have been my top choice from this list. Why? Patents. I value TiVo's patent portfolio at roughly $422 million. Adding $98 million in cash and investments gives TiVo a conservative asset value of $519 million -- yet its market cap is a shade less than $587 million as I write today. Intriguing, no?

A fix of Netflix
Indeed, but I like the other TV stock on our list, Netflix, better for two reasons:

  1. Capital requirements.
  2. Cash flow.

What I mean is that Netflix, because of its lower capital requirements, produces a ton of free cash flow that is being used to fund growth and protect its franchise.

But isn't that franchise in danger from a resurgent Blockbuster (NYSE:BBI)? Certainly. Were Netflix on pace never to become anything more than an online movie-rental business, I wouldn't just be selling the stock -- I'd be shorting it.

Yet, thanks to its emerging Watch Now instant-viewing service, I see a far richer future for Netflix than others might. Here's why:

  • IPTV, which is tech-speak for delivering the Internet to your TV, is real and being delivered by AT&T.
  • Chip makers such as Sigma Designs (NASDAQ:SIGM) are making it easier to create set-top boxes that deliver IPTV signals.
  • Roughly half of American households have broadband access today, and the number is growing.

See the pattern here? The pace of innovation ensures that you'll someday be broadcasting Web content via your TV. What you'll broadcast remains the question.

I have a radical idea. How about TV shows? How about any TV show, any time of day or night? That's what Netflix is in position to provide. Right now, for example, you can instantly watch all 23 episodes of the first season of Heroes.

If only Netflix could deliver new movie releases this way, eh? Yeah, but don't worry too much about that. DVDs won't go away soon, and the company's rent-by-mail business should provide years of free cash flow.

Expect CEO Reed Hastings to put that to work on improving the Watch Now service, to the point that you'd pay a small fee to stream your favorite shows in the format that best suits your TV, budget, and tastes -- with or without ads, high-definition or regular, unlimited-menu or pay-as-you-go.

Doesn't that sound like a business model worth owning? If so, I've got good news: Shares of Netflix are selling for just 6.5 times trailing free cash flow. That's too cheap to ignore; I've added the stock to my CAPS portfolio.

But that's me. What would you do? Would you buy Netflix at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

See you back here next week for five more unloved growth stocks.

Amazon and Netflix are Stock Advisor recommendations. Sigma Designs is a Rule Breakers pick.

Tim Beyers, who is ranked 8,151 out of more than 75,000 participants in CAPS, is a regular contributor to Fool.com and Rule Breakers. Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Click here for Tim's portfolio and here for his latest blog commentary. The Motley Fool's disclosure policy is your portfolio's competitive advantage.