Imagine for a moment that you have the opportunity to invest in a company that:

  • Does business in an emerging and critically important product line.
  • Is revolutionizing the way its industry operates.
  • Has a strong, deep moat.
  • Is small enough to have lots of room to grow.

Would you do it?

These are great reasons to buy
I admit it. I was bullish about Intuitive Surgical back in February 2006 -- because it had everything going for it.

Its da Vinci robots had revolutionized surgery. They offered smaller scars, faster healing, and fewer surgical infections. Because it takes years of research and a long, expensive FDA approval process to bring a device to market, its competitive advantage was, in effect, protected by the government. And the company was tiny. At that time, Intuitive Surgical had just closed a year with $227 million in sales -- compared to the $2.8 billion quarter fellow device maker Medtronic had just completed.

I liked Intuitive Surgical so much that I proclaimed that it had the potential to revolutionize its industry. I had visions of it becoming practically as ubiquitous in surgical settings as Bell Labs' (now a part of Alcatel-Lucent (NYSE:ALU)) transistor is in the rest of our lives.

In other words, the company and its stock were poised for success, and both saw that success play out. Since I wrote that article, even in the midst of this current chaos, Intuitive Surgical shares have blown past both the overall market and others in its industry:

Company

Price on
02/09/2006

Price on
12/02/2008

Change

Intuitive Surgical

$101.50

$117.95

16%

Integra LifeSciences (NASDAQ:IART)

$37.70

$31.94

(15%)

ResMed (NYSE:RMD)

$41.41

$34.80

(16%)

China Medical Technologies (NASDAQ:CMED)

$35.90

$18.45

(49%)

S&P 500

1,263.78

848.81

(33%)

Stock prices adjusted for splits.

While Intuitive Surgical has fallen far from its $359 high, had I invested, I would have trounced the S&P 500 and still made money -- even in this market!

But I never pulled the trigger ... even though I loved the company.

I messed up
I chickened out because I was scared of the stock price. It didn't seem cheap.

Traditional bargains are industrial titans like 3M (NYSE:MMM) and United Technologies (NYSE:UTX) amid an economic slump or tech giant Intel (NASDAQ:INTC) after a product flop. They have track records, a proven ability to deliver returns, and an established customer base -- and, thus, a strong chance of emerging from their slumps as normality returned.

Intuitive Surgical, on the other hand, had a great product, terrific potential, and some early successes -- but no proven ability to scale. And even great ideas with enormous potential can fail if they're executed poorly.

In the end, I focused on my fear that this investment would fail -- instead of on the reasonable expectation of rewards.

Fight the fear
Given everything else going for it, I should have invested in Intuitive Surgical despite the risks -- because it wouldn't have been my only investment.

Each stock matters, and each stock needs to be chosen for the right reasons (like being the first mover in an emerging industry and having a deep, wide moat), but in the end, it's the overall portfolio that counts. A single stock that quickly skyrockets can make up for a whole lot of them that wind up going nowhere fast.

That's a powerful antidote to the fear that you may be wrong on any individual pick.

So, to come full circle, imagine for a moment that you have the opportunity to invest in a company that:

  • Does business in an emerging and critically important product line.
  • Is revolutionizing the way its industry operates.
  • Has a strong, deep moat.
  • Is small enough to have lots of room to grow.

Would you do it, even if it weren't "cheap" by traditional measures? If you have an otherwise well-rounded portfolio, you should be nodding your head yes. Because those types of stocks -- innovators, disruptors, companies shaking up the "normal" ways of doing business -- are the stocks you don't want to miss.

Finding those companies is our mission and purpose at Motley Fool Rule Breakers. Does that mean every pick has been a winner thus far? Nope -- but the ones that have doubled or more go a long way toward making up for the ones that have been slower to prove themselves.

So take a deep breath, think about your portfolio holistically, and try to overcome the fear of failure that has kept you from buying some of the greatest investment opportunities the market has to offer. If you need stock ideas or reassurance from a like-minded community, join us at Rule Breakers today. A 30-day free trial gives you access to our best picks for new money now. Just click here to get started.

This article was originally published July 25, 2008. It has been updated.

At the time of publication, Fool contributor Chuck Saletta owned shares of Alcatel-Lucent and Intel. And no, he never did buy Intuitive Surgical, but it certainly is starting to look attractive again. Intuitive Surgical is a Rule Breakers pick. 3M and Intel are Motley Fool Inside Value recommendations. Integra LifeSciences is a Motley Fool Stock Advisor pick. The Fool owns shares and covered calls of Intel. The Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.