Tomorrow's Monster Stocks?

By Rich Duprey May 5, 2008 Comments (0)

15 Recommendations

Stocks that climb to 10 times their original price are rare -- but not impossible to find. Especially when you have Fools for friends.

The market's best stocks include companies that have risen hundreds of times in value over the past decade. These aren't penny stocks; they're viable companies with sound business prospects, achieving phenomenal returns every year. Finding just one or two of these monstrously successful companies can help you establish a winning portfolio.

Stalking the monster
To find tomorrow's monster stocks, we'll enlist the more than 100,000 investors at Motley Fool CAPS. We've compiled a list of the most successful CAPS players, dubbed All-Stars, whose picks have doubled, tripled, or even quadrupled in price. Then we've plucked out some of their recent picks for stocks they find equally promising.

Player

CAPS Rating

Monster Stock

CAPS Score

Recent Stock Pick

CAPS Rating

Sooners11

99.51

First Solar

826.08

Diageo (NYSE: DEO)

*****

eltspx

95.37

Mechel

559.84

Visa (NYSE: V)

****

hhuang1

95.10

MasterCard (NYSE: MA)

538.09

Huaneng Power International (NYSE: HNP)

*****

jmulcahy047

97.28

Mechel

522.19

Obagi Medical Products (Nasdaq: OMPI)

*****

IsleGirl2010

94.32

First Solar

505.53

Morningstar (Nasdaq: MORN)

****

Of course, this is not a list of stocks to buy -- or, for those monster stocks that our CAPS All-Stars have already found, to sell. Just consider them starting points for your own further research.

A passport to profits
It's not that the names of MasterCard or Visa are unknown, but they were not public companies until recently. Perhaps it's because every day we open our wallets to use one of these credit cards to make a purchase -- even a cup of coffee -- we're convinced that these are two powerhouse brands that are worthy of high multiples. In fact, their ubiquitous presence causes them to be valued at twice that of American Express (NYSE: AXP) on a forward earnings basis.

But will Congress end the party? The Federal Reserve has proposed regulations that will supposedly help us from driving ourselves deeper in debt by preventing so-called "deceptive and unfair" credit practices. It wants to bar rate increases on existing balances and finance charges based on balances from previous billing cycles; give consumers more time to make payments before they are considered overdue; and prevent companies from steering payments to reduce the portion of the bill that had lower interest charges.

Of course, the regulations do nothing to stop the biggest reason for our rising levels of debt: our inability or lack of desire to live within our means. Credit card companies obviously oppose the measures that address the symptoms without touching the cause.

Despite the move, investors like loststallion38 still see Visa as catching up to, if not surpassing, the achievements of MasterCard in the public markets:

Well if you don't know you should. Visa has launched its IPO and the stock is on the market. First day $44.00 to start and at the end of the day $56.50 and that is just the beginning. MasterCard launched last year at $39.00 a share and it stands at over $200.00 a share. It's not everyday that you can get in on the ground floor of the big daddy business but here is your chance. Visa is the power house in the credit card world and is just plain fat in cash. It lives on transactions all over the world from Debit and Credit cards for gas to groceries, paying bills and purchases online Visa will only grow as we move to a cashless society.

A chance for scary growth
Now's the opportunity for you to weigh in on Visa or any stocks these All-Stars see as achieving monster growth. Agree with their views? Tell us on CAPS. If you don't agree, let us know that, too! If you've got an opinion, then this is the place where your voice counts as much as anyone's. Let's hear if you think these are tomorrow's monster stocks.

Diageo and Huaneng Power are recommendations of Motley Fool Income Investor. Huaneng is also a Rule Breakers pick, and Morningstar is a Stock Advisor selection. American Express is a Motley Fool Inside Value choice. A 30-day free trial to any of the Fool's investment services will let you see the monster returns to be had by buying the market's castaways. The Motley Fool owns shares of Morningstar.

Fool contributor Rich Duprey does not have a financial position in any stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

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MasterCard, Inc.

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