Remember that scene in Meet the Parents when Ben Stiller discovers that his fiancee's ex-fiance (played by Owen Wilson) lives in the American equivalent of Versailles and builds ornate altars out of rare wood in his spare time?
I remember it because after showing off his Bolivian wormwood floors, Owen Wilson casually mentions the fact that he "got in early on some wireless IPOs, and the stuff just skyrocketed from there."
"Strong to quite strong"
That's how Ben Stiller describes his portfolio to Owen Wilson. Obviously, it's a lie. But the thing is, even if it were true, he still probably couldn't have afforded to live the way Wilson did. Because, let's face it, most investors can't -- no matter how strong their portfolio is.
That is, unless you somehow manage to find the one stock that changes everything. And we all know that's no easy task.
To make matters worse, even if you do find a world-changing, fortune-making company like Boeing
Or has it?
Don't get me wrong. I'm all for disciplined long-term value investing. However, as my colleague Tim Hanson recently pointed out, there's nothing wrong with dedicating a portion of your time and portfolio to finding the next home-run stock.
And that's why I want to introduce you to a world-renowned investor who specializes in finding winning stocks after everyone else on Wall Street says it's too late to cash in, and I want to give you the details on one top stock pick from his Motley Fool Rule Breakers service -- with no strings attached. (All you have to do is keep reading.)
What you don't know could make you a fortune
You may know I'm talking about Motley Fool co-founder David Gardner. And you may also know that America Online soared by some 20,000% after he recommended that investors buy it in the summer of 1994.
But what you may not know is that America Online had more than quadrupled in the year before he recommended it -- and, as a result, lots of Wall Street "experts" were saying it was too late to cash in.
It was the same story with Amgen and Starbucks in 1998, with eBay in 1999, and more recently, with Intuitive Surgical.
David Gardner recommended this maker of non-invasive surgical equipment to his Rule Breakers members back in March 2005, when shares were selling for $44.17. One year before that, shares sold for $17.46 -- and for just $8.68 a year before that.
In other words, it looked like Intuitive Surgical had already had its run.
But it went on to trade as high as $353, and it's currently trading in the $340 range -- roughly a 675% gain for those who bought in March 2005.
Lucky -- or good?
Contrary to what you might think, David Gardner isn't some sort of Wall Street Evel Knievel who doesn't go near a stock unless its price-to-earnings ratio is north of 100.
Instead, he's calculated and meticulous (if you don't believe me, challenge him to a board game sometime), and he runs every company through a six-point checklist:
- Is it the "top dog" and "first mover" in an important, emerging industry? (Think of revolutionary companies like Best Buy
(NYSE: BBY), CarMax (NYSE: KMX), or Intuit (Nasdaq: INTU)).
- Does it have a sustainable advantage?
- Does it have strong past price appreciation?
- Is good management in place with smart backing?
- Does it have strong consumer appeal?
- Has the media said it's overvalued?
A stock with all or most of these six traits is a Rule Breaker in the making -- and it may well be worth your investment dollars.
A quintessential Rule Breaker
There's a chance you've never heard of Green Mountain Coffee Roasters, but thanks to an economic downturn that has suddenly made frugality fashionable, this backwoods company is starting to give "luxury" coffee purveyors like Starbucks, Peet's, and Caribou Coffee a real run for their caffeinated crowns.
That's because Green Mountain makes the "K-Cup" single-serving coffee machines that are showing up in homes and offices across the country -- and are now being sold everywhere from Target to J.C. Penney to Bloomingdale’s.
In the second quarter, it sold 479,000 personal coffee brewers -- a whopping 148% jump from the previous year -- and more than 432 million coffee packets, a 62% year-over-year increase. Similar story for the third quarter.
And not only is Green Mountain the top dog in this industry, but it has also strengthened its foothold by partnering with tea and coffee companies around the world, including Newman's Own Organics, Celestial Seasonings, and Gloria Jean's, all of which pay Green Mountain a royalty for each coffee or tea packet sold.
Net sales grew by 52% in 2007, 46% in 2008, and despite a tough economy, another 65% in the quarter ended Sept. 30. Earnings also rose 103% in that quarter. So it should come as no real surprise that between March 1999 and March 2009 -- the month Green Mountain was featured in Rule Breakers -- shares climbed by more than 3,500%. Nor should you be shocked that it has risen by another 215% since then.
Too late to cash in?
David Gardner and his team don't think so. But you can judge for yourself by taking a free 30-day trial of Rule Breakers. You'll get access to detailed research write-ups of every stock on the Rule Breakers scorecard, including Green Mountain Coffee Roasters and Baidu.com
You'll also get David Gardner's two top growth-stock picks for new money now and 24-hour access to a community of dedicated investors who consistently prove that Wall Street doesn't always know best.
There is no risk, nor any obligation to subscribe. Stick with us if you like it; pay nothing if you don't. To learn more, simply click here.
This article was originally published on Oct. 28, 2009. It has been updated.
Austin Edwards doesn’t own shares of any of the companies mentioned. Best Buy, CarMax, and Nokia are Motley Fool Inside Value picks. Baidu, Green Mountain Coffee Roasters, and Intuitive Surgical are Rule Breakers recommendations. Best Buy, eBay, and Starbucks are Stock Advisor picks. Motley Fool Options has recommended a bull call spread position on eBay. The Fool owns shares of Best Buy. And, no, you can't milk The Motley Fool's disclosure policy, no matter how hard you try.