Beat This Stock!

A basketball or baseball game has only one winner, but investing offers many roads toward profits. We don't need to find the "best" stock year after year to secure our financial future -- we just need to find really good stocks, really consistently. Now, the collective intelligence of our 83,000-plus Motley Fool CAPS investors makes that task easier than ever.

For every high-rated stock on CAPS -- such as four-star-rated Sigma Designs (Nasdaq: SIGM  ) , a consumer-appliance chipset maker -- there's an even better stock above it in the rankings. Just look for the "Beat This Stock!" button in the top right corner of each stock's CAPS page. As you keep clicking, you'll climb the CAPS ladder toward the service's No. 1-ranked stock. Along the way, you'll gain a handful of stock ideas that might help you beat the market by an even wider margin than your favorite company could.

So who ranks better than Sigma Designs, a Motley Fool Rule Breakers recommendation? Below are six stocks that ranked higher in the opinion of CAPS' investors. (Keep in mind that CAPS is a dynamic service, so although these were the companies I found this morning, the list may be a bit different for you.)

Company

1-Year Return

Long-Term Growth Forecast

Sigma Designs

92.71%

23.2%

Balchem (NASDAQ:BCPC)

30.32%

20.0%

BladeLogic (NASDAQ:BLOG)

(27.28%)

34.3%

CDI (NYSE:CDI)

(20.87%)

15.0%

Atwood Oceanics (NYSE:ATW)

86.04%

36.0%

First Trust NASDAQ Clean Edge US Liquid

21.41%

N/A

Compton Petroleum (NYSE:CMZ)

(3.26%)

5.0%

Sources: Yahoo! Finance, Motley Fool CAPS. N/A = not available.

This is obviously not a list of stocks to buy; instead, it should be a springboard for your own due diligence. Still, let's examine some of the reasons why CAPS investors think these companies' returns will beat Sigma Designs and the market alike.

Drilling for profits
Although we've seen oil prices slip down in recent weeks from the $100-per-barrel price mark, it seems doubtful that we'll have cheap oil again anytime soon, if ever. Yet even at these lower prices, oil companies are still making big profits, and they need to keep up with increasing demand. That means they must keep drilling. And that's where Atwood Oceanics, a small underwater driller, profits.

Atwood has a relatively small fleet of rigs, but it has contracted with companies for several years into the future, so it should have a stable revenue stream even as oil prices and dayrates ease.

Shares of the oil-services company took a hit recently from three fronts: a drop in oil prices, a $900,000 charge to earnings over a billing disagreement, and a lower-than-expected earnings report from Schlumberger (NYSE: SLB  ) , which also offered cautious guidance.

Over on CAPS, 99% of all investors who chimed in with an opinion view Atwood as an outperform, and among 300 CAPS All-Stars, that view is unanimous. MiamiStuDog, with a 96.65 player rating, states that he holds the stock in his real-world portfolio because he views the company as "best of breed":

This is a company in which Equity growth is averaging 32% over recent years, and for which forward [earnings-per-share] growth is estimated in the 57-67% range. Profit and Operating Margins are both above 30%, with a [return on equity] of 26% and a [return on assets] of 15%. Exceptional in all categories.

I'm setting a Target Price of $118.48, at which point it would have a [price-to-earnings ratio] of 27, based on today's EPS. ... I [believe] this company to be a best-of-breed, and hope to hold it for a long time to come.

All-Star Gtrinvestor, who ranks higher than 99.98% of all other CAPS investors, sees Atwood as an excellent long-term investment and moved in early with his outperform call:

ATW isn't as much of a pure play in deepwater drilling yet as I would like, but they are moving this way. With the company's small size I think there is a good chance it gets bought out as well. If not, still a good long-term investment.

Just beat it!
Is CAPS correct? These companies may rate higher than Sigma Designs, but will they top its performance going forward? Head to Motley Fool CAPS and share your opinion on your favorite stock to beat.


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