Ask a Fool: How Can I Find the Next Facebook or Amazon.com?

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Q: I have a diverse portfolio of blue chip stocks and ETFs, but would like to use some of my money to invest in a few stocks that could become the next big thing. How can I find the Facebooks and Amazon.coms of tomorrow?

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No stock that has the potential of producing that type of growth is without a significant amount of risk, so it's important to never buy speculative investments with money that you can't afford to lose.

Having said that, it's fine to chase the "next big thing" with a small portion of your portfolio. When I look for high-potential stocks, I look for innovative companies that solve a problem, and have the capability to scale their business far beyond its current size.

For example, Square (NYSE: SQ) is a company that I believe has the potential to grow to many times its current size. It has been highly successful at solving a problem: Many small businesses don't have a practical way of accepting card payments.

Even after several years of impressive growth, Square still has a small market share of card payment volume, and is only in a few international markets. Plus, the company is creating a small-business ecosystem with solutions such as small-business lending, consumer financing for purchases, and a food-delivery platform that smaller restaurants can use.

Online-only bank BofI Holding (NASDAQ: BOFI) is another example. The bank's innovative branchless business model counters the inefficiency problems of brick-and-mortar banks, and the company has shown a high rate of growth in recent years. With a new exclusive partnership with H&R Block, as well as its new auto- and consumer-lending businesses, the bank with a relatively small $8.5 billion in assets could have lots of room to grow.

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Matthew Frankel owns shares of Square. The Motley Fool owns shares of and recommends AMZN, BofI Holding, and FB. The Motley Fool owns shares of Square. The Motley Fool has a disclosure policy.