5 High-Risk, High-Reward Companies

Disenchanted with the poor returns and high fees on mutual funds, some family members recently asked me to help them mold a good growth portfolio.

The working thesis I used for my recommendations was: "Invest first and foremost in companies that demonstrate exceptional levels of innovation, with special emphasis given to those that we believe will be around decades from now."

On Thursday, I offered up the four stocks I recommended as core holdings. On Friday, I talked about four more stocks worth investing in, but probably not at levels above 10% of their portfolios. Today, I'm offering up the five stocks that I told my family were high-risk, high-reward bets. Though there's no doubt these companies are innovative, their future could go in many directions.

Add these five to your watchlist to stay up to date on all the latest news, and at the end I'll offer you access to a special free report on a company that founding Fool David Gardner believes could be the next rule-breaking multibagger.

MAKO Surgical (NAS: MAKO)
You know, I initially made this list just before the new year. Had I been privy to the information that MAKO just released, I might have included it as a less risky bet.

MAKO's RIO surgery system gives patients the ability to have less invasive knee-replacement surgery -- which leads to quicker recovery times than standard procedures. Recently, the company also got approval to perform robotic hip-replacement surgery.

When it comes to medical devices, adoption is the key to success -- especially with expensive systems like RIO. It seems, however, that the company may be reaching a tipping point, and that bodes well for the company.

I already own shares of MAKO, I have made a CAPScall on my profile, and I think prices are a relatively good deal today.

Baidu (NAS: BIDU)
Some may say Baidu isn't all that risky, and others will say that it isn't that innovative -- as it more or less emulates Google and just applies those lessons to business in China. To those people I would say this: first, a powerful Communist government should never be written off as harmless, and there's nothing wrong with copying innovation.

Clearly, Baidu shares have appreciated significantly over the past five years, up more than 900%. But there are still hundreds of millions of Chinese consumers yet to come online, and the company has consistently won over skeptics who doubted their ability to execute.

I will be purchasing shares of Baidu when trading rules allow, and I have made a CAPScall on my profile. I think any price below $110 would be an excellent opportunity to snatch up more shares.

  • Add Baidu to My Watchlist.

Solazyme (NAS: SZYM)
Here at the Fool, we have mixedfeelings about Solazyme. The company is able to take patented microalgae, give it feedstock, and have the algae produce tailored oils.

But here's the great thing about this company: It's focused on much more than just biofuels. The company is also able to make tailored oils -- at a cheaper cost -- for both the cosmetic and nutritional health industries. Not be ignored, however, are that its biofuels are also used by the Navy and have helped transport commercial airliners as well.

I believe Solazyme is pretty cheap right now. I've backed that belief up with my own money and on my profile.

Stratasys (NAS: SSYS)
See if you can wrap your head around this: 3-D printers actually allow you to make 3-D things right in your own house. Sound like a story from The Jetsons? Well, believe it, because this budding technology could be the basis of the way things are made in the 21st century.

I've already called the company out as one that can benefit from a deleveraging, downshifting economy. As the technology gets more advanced, Stratasys' printers could help us make everything from T-shirts to bikes to even food.

I have made a CAPScall on my profile and will be buying shares when trading rules allow, but I'm going to take a wait-and-see approach before buying after that, to see how the company's partnership with Hewlett-Packard works out.

Zipcar (NAS: ZIP)
Zipcar had its IPO in 2011 but hasn't had the greatest of starts since its birth on the public markets. However, I don't think that's indicative of this company's future. Buying a car is expensive, as are gas and insurance. Throw in the fact that as our population grows, cities are getting more crowded, parking spaces are becoming more scarce, and pollution is becoming a bigger problem, and you have a situation nearing a breaking point.

That's where Zipcar enters the scene. With Zipcar's having just turned its first profitable quarter, and with a fanatic fanbase of Zipsters pushing the company forward, I think now's a great time to buy shares of this car-sharing company. I've already bought shares, and that's reflected on my profile as well.

A name for this type of investing
Truth be told, the "growth" moniker may not be the most accurate for this type of investing. By focusing on innovation, I'm really zeroing in on what Fool Founder David Gardner calls Rule Breakers.

David runs a highly successful newsletter based on Rule Breakers, and they've recently assembled a special free report about The Next Rule Breaking Multibagger. Inside the report, you'll find out about a company that's poised the benefit from our aging population. Get the report today, absolutely free!

At the time thisarticle was published Fool contributorBrian Stoffelowns shares of all of the companies mentioned except for Baidu and Stratasys, which he'll be purchasing when trading rules allow. You can follow him on Twitter at@TMFStoffel.The Motley Fool owns shares of Zipcar, MAKO Surgical, Google, and Solazyme.Motley Fool newsletter serviceshave recommended buying shares of MAKO Surgical, Google, Stratasys, Zipcar, and Baidu. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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