Stocks Everyone Says to Buy Now

Some stocks simply have such great potential, "everyone" knows they are a good buy today. Yeah, we wish.

If we had known that NVIDIA (Nasdaq: NVDA  ) would return 2,300% since it came to market in 1999, we'd have mortgaged the house to the max. If we had had the inside scoop that Hansen Natural was a 26,000% winner over the past decade, we'd have mortgaged your house too!

In fact, if investing were so easy, we'd all be millionaires. After the fact it's easy to see which companies were winning investments. What we need is a way to know ahead of time which companies will become the next Microsoft or Wal-Mart, growing tens of thousands of percent in value over the years. But there hasn't been a way.

Until now, that is.

More than 70,000 professional and novice investors have rated stocks on Motley Fool CAPS, and we can check in on their opinions about which stocks will beat the market and which will lose to it. While it's often a tug-of-war between the bulls and the bears, we've identified dozens of stocks that members of CAPS have unanimously chosen to outperform the market.

That's no small feat. Thousands upon thousands of companies have been rated, and convincing arguments can, and are, made on both sides. For example, Motley Fool Stock Advisor recommendation Unit Corp (NYSE: UNT  ) is rated really high by nearly 1,200 CAPS investors. But while 1,172 of them think the stock will beat the market, that still means there are a half dozen CAPS investors who don't.

So when you come across a stock that everyone thinks will outperform, you've got something special, and we investors ought to take notice.

Here are a handful of those "obvious" investments.

Company

Bulls

CAPS Rating

SM&A (Nasdaq: WINS  )

193

*****

RAM Energy Resources (Nasdaq: RAME  )

58

*****

Augusta Resource (AMEX: AZC  )

55

*****

Kaydon Corp. (NYSE: KDN  )

82

*****

Sociedad Quimica y Minera  (NYSE: SQM  )

94

*****

As always, none of the companies on this list can be considered formal recommendations, but rather starting points for further research. What we've done is narrowed your workload by focusing on those companies CAPS investors are universally expecting to beat the market.

Winning with SM&A
A consulting firm for the aerospace, defense, information technology, commercial services, electronics, and utilities industries, SM&A has attracted quite a following among CAPS All-Stars. Almost half of the investors rating the company are CAPS best.

It has attracted top-rated All-Star Fools who offer some simple endorsements: TMFMmbop ("I *heart* government spending") and TMFOtter ("so cheap"). Yet another All-Star, whatismyoption, has detailed a number of issues that -- while still rating it an outperform -- gives the player pause for several reasons:

    • Over $8M in cash and investments and no debt. Tick
    • Very strong year-over-year revenue growth. Tick, but have seen this sort of lumpiness before and it has failed to become a trend.
    • Due to ballooning accounts receivable, is cash flow negative for the first six months of 2007. AR is almost $25M so need to check on if any outstanding and likelihood of defaults.
    • They acquired PPI in early February. Without that acquisition the year on year growth is considerable less than the top line numbers show, but is still healthy.
    • Options outstanding equal around 10% of shares outstanding.
    • They have certainly laid out the risks clearly. I see the following of particular concern.
      1. Loss of political support for current or increased levels of spending
      2. Changes of presidential administration, particularly changes from one political party to another, that typically result in a mass reordering of priorities that reduce new proposal activity for up to a year
      3. Threat scenarios evolving away from global conflicts to regional conflicts
      4. Spending for ongoing operations, such as the war on terrorism or the occupation of Iraq, creating downward pressure on spending for procurement of new systems and research and development spending
      5. Number two in particular could see revenue and earnings drop next year.

SM&A derive a significant portion of revenue from a relatively limited number of clients. Their seven largest customers have accounted for around 80% of their revenue. This is another risk factor worth considering.

SM&A was marked as a "tiny gem," which is a promising company that's simply too small to earn the full endorsement of Motley Fool Hidden Gems analysts. A number of CAPS investors concur, even if some might have some misgivings. You can read whatismyoption's full analysis by clicking here.

Let's hear from you
How about you? What's your take on these or other "obvious" winning investments?  If you want to add your two cents, sign up to join the Motley Fool CAPS community, which is 100% free.


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