We’re stuck in a binary stock market. In recent years, investors have been willing to embrace richly valued high-growth stocks during “risk-on” buying phases.

#-ad_banner-#But right now, we’re in a “risk-off” phase of the market. Risky biotechs, dot-coms and recent IPOs have all slumped badly, while value stocks are faring well.

The shift away from risk brings a silver lining: Stocks that were only recently in the investing stratosphere have fallen so hard that they now carry a lot less risk then they once did.

The key in such market shifts is to find companies that are truly on the forefront of a major industry trend, what we here at StreetAuthority call “game-changers.”

As an example, there is a clear migration away from traditional radio and toward music streaming services. This trend is poised to continue as automakers roll out car stereos with integrated streaming radio apps. And no company is as well-positioned as Pandora (NYSE: P).

As I recently noted, “Pandora has a real shot at becoming the de facto car radio for millions of listeners, and the recent share price pullback provides a fresh chance to latch on to this high-growth business model.”

In a similar vein, I’ve been tracking the profound industry changes impacting the advertising industry. You may have noticed that recent ads on Web pages seem to be especially well-suited to your tastes. These targeted ads are highly valued by advertisers, many of whom have wondered if their ads are reaching the right audience. As department store operator John Wanamaker once said: “Half the money I spend on advertising is wasted — the trouble is, I don’t know which half.”

And one of the leading new firms in the field of targeted digital advertising is Rocket Fuel (Nasdaq: FUEL).

The company has developed artificial intelligence algorithms to deliver optimized ads in support of branding campaigns. Though the company only began operating in 2008, and had only $16 million in revenue as recently as 2010, its growth since then has been meteoric: Sales exceeded $100 million in 2012, $200 million in 2013, and are expected to approach $700 million by next year.

Those growth rates are being extrapolated from industry growth forecasts: eMarketer predicts that spending on programmatic advertising will rise roughly 165% from 2013 to $9 billion by 2017.

That kind of growth initially fueled a stunning surge in the stock, though the shift from “risk-on” to “risk-off” has suddenly led investors to shun this stock.

To understand why this high-growth stock has lost half of its value since early January, we can look at several negative catalysts.

First, management took note of a surging stock price to quickly sell more stock, announcing plans to sell $300 million in additional stock in January (though more than half of the offering was geared toward sales by Rocket Fuel’s venture capital backers).

That deal was followed by waves of insider selling in February, which hardly expressed a vote of confidence. Those insiders somehow managed to sell shares before the March 19 lock-up expiration date. At that many point, some of Rocket Fuel’s rank-and-file employees presumably also sought to unload shares.

Another negative catalyst: Investors may be spooked by rising competition. Rivals Criteo (Nasdaq: CRTO), Tremor Video (Nasdaq: TRMR), Rubicon Project (Nasdaq: RUBI) and YuMe (Nasdaq: YUME) have all come public in the past year, and fresh IPO cash leads all parties concerned to boost spending to gain market share. It’s a fast-growing market that they are all targeting, but competition will blunt growth for each company to some extent. (This article on Seeking Alpha helps to explain each of these firms’ relative industry positioning.)

The sharp drop in shares has clearly pushed this stock below any sort of intrinsic value. Goldman Sachs’ $69 price target, for example, is more than double the current share price. With an imminent quarterly report to digest, investors have a chance to quickly assess whether Rocket Fuel is still poised for the growth rates that current consensus forecasts imply. Barring a sharp slowdown in the business, this stock could be poised for a heady relief rally.

Risks to Consider: Concerns have arisen regarding the efficacy of online ads, as response rates remain below levels that advertisers had previously hoped. If that leads to a shake-up in advertising strategies toward traditional platforms such as billboards, broadcasts and print, then all of these digital advertisers would suffer.

Action to Take –> Rocket Fuel will deliver first-quarter results on May 8. High-growth stocks can be quite volatile when results are released, so it pays to assess expectations and then see how the company did relative to those expectations. Yet if management reaffirms the robust growth rates that analysts anticipate, it will be safe to buy this fallen game-changer. 

P.S. My colleague Andy Obermueller loves to hunt for stocks with Rocket Fuel’s kind of game-changing potential — so much so that he named his advisory Game-Changing Stocks. His finds have returned as much as 310% in a year, so click here to learn how to put his research to work in your portfolio.