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Readers Pick Seven That Could Double

The speculation gene is alive and mutating in Supermodels readers this summer, as I received hundreds of responses to my request for suggestions on stocks that could double over the next 12 months.

In a country that loves lotteries, race tracks and slot machines, there's little wonder that more than 90% of the ideas were the sort of very small companies that the investment world calls microcaps -- and more than half of those were the very iffy companies that trade in the netherworld of the notorious Pink Sheets or on the Bulletin Board.

Blame me for making the criteria so open-ended. I required only a price over $1, market capitalization over $50 million and daily trading volume of 25,000. And my own nine suggestions weren't exactly contenders for heavyweight crowns. The pick that I offered that has risen the most since -- fulfilling its one-year target in two weeks with a 117% gain -- was New Dragon Asia (NWD), a small but mighty maker of instant noodles in northern China.

So in the spirit of those who like their free lunch fast and hot -- and with a caveat that they could easily spill and burn -- here are some readers' proposals for stocks that could double in the next year. (Because I'm a penny-stock prude, and to provide a modicum of sobriety, I have removed all of the Pink-Sheet and Bulletin Board ideas from this soup.)

An Educated Guess

Most picks were in the technology world, but let's start with Learning Care Group (LCGI), which is essentially a franchisor of preschool programs for tots as well as after-school programs for older children. Its schools are marketed under the Childtime and Tutor Time brand names across the country, and they serve a highly fragmented industry.

The stock fulfills a number of my requirements for potential doublers: It has traded as much as three times higher in better times and for less than $1 in worse times. It has a new management team that has developed a fresh approach to franchising and expanding a core concept.

Its chief executive has been buying shares in the open market, and its shares are cheap in relation to those of its industry peers, with a price-to-sales multiple of 0.5. Institutional owners include the smart folks at DDJ Capital Management, a specialist in distressed companies, and the value hounds at Heartland Advisors. And there has been solid but not outrageous recent technical momentum. A double would only take the market capitalization of Learning Care to $220 million, which is reasonable for a company with $212 million in trailing 12-month sales.
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