Tomorrow's Monster Stocks

Stocks climbing to 10 times their original price are rare breeds. But they're not impossible to find -- especially when you have Fools for friends.

The market's best stocks include companies that have risen dozens of times in value over the past decade. These aren't penny stocks. They're viable companies that have sound business prospects and achieve phenomenal returns every year. Finding just one or two of these monstrously successful companies can help you establish a winning portfolio.

Stalking the monster
To find tomorrow's winners, we'll enlist the 120,000-plus monster trackers at Motley Fool CAPS. We've compiled a list of the most successful CAPS members, dubbed All-Stars, whose picks have doubled, tripled, or even quadrupled in price. Then we've plucked out some of their recent picks for stocks they find equally promising.

Of course, this is not a list of stocks to buy -- or, for the monster stocks that our CAPS All-Stars have already found, to sell. Just consider them starting points for your own further research of extreme buying opportunities.

In search of Bigfoot
Make the right bet with a biotech, and you can find yourself on the winning side of huge profits. Bet the wrong way, and you'll find yourself in the situation investors did with Savient Pharmaceuticals last week. Investors thought Savient could be a home run with its Puricase gout treatment. But last week, the pharma reported that its therapy had shown some serious side effects, including two cardiac arrests and one heart attack. These reports were on top of five deaths previously reported -- although they may not have been caused by the drug.

Savient said it will move ahead with its FDA application anyway, but the probability for drug approval is difficult to imagine. The market sold off the stock by 73% in one day.

Back in July, under my CAPS screen name TMFCop, I also argued that the treatment was a potential blockbuster. Although I recognized the risky nature of the game, I suggested that Savient might be a stock to include as part of a diversified portfolio. Ouch for my CAPS score:

Its severe weight loss generic drug is eating into revenue base so it definitely needs something else to replace it.

The orphan drug status of [Puricase], if/when it receives FDA approval, could be the one. According to at least one analyst, the market potential is some $600 million in sales for Savient which, considering Savient's current market cap, would be a potential blockbuster for growth. …

Certainly a risky investment, but as a small part of a larger, well diversified portfolio, Savient could be a stock to include.

On another front, we know that some companies make an acquisition here and there and are satisfied. But others, such as Nuance Communications, make buying up rivals a part of doing business. Investors have seen that approach happen once again, with the close of its SNAPin Software purchase and its acquisition of Phillips Electronics' (NYSE:PHG) voice-recognition business. The company has made more than a dozen such buyouts over the past few years, with no intention of slowing down.

But going this route creates a lot of risk. Dilution is a problem when shares are issued to make an acquisition, and debt can be equally burdensome if a company piles it on to make the purchases. Nuance did both. Diluted shares outstanding have grown by 32% over the past two years, and debt has mushroomed from $355 million to $902 million.

CAPS member Jeffreyw sees what Nuance does as an asset: "Nuance has done well and continues to grow and acquire others to improve product [quality] and add capabilities."

A chance for scary growth
It takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions, so start your own research on these stocks on Motley Fool CAPS. You can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. And while you're there, weigh in with your own thoughts on whether these are tomorrow's monster stocks.