5 Stocks That Just Won't Quit

"The bigger they are, the harder they fall. It's the worst nightmare of every investor in today's market -- buying a hot stock just before it takes a nosedive."

So goes the thesis of my weekly Fool.com column "Get Ready for the Fall." Therein, I run the 52-week highs compiled on Nasdaq.com through the "wisdom of crowds" meter that we call Motley Fool CAPS. And out the other end comes a list of stocks that have flown so high, investors are starting to get nervous about this "gravity” thing.

But it's an undeniable -- and often glorious -- fact of investing life that some stocks seem immune to gravity. They rise for one year, then fail to fall back to Earth. Instead, they soar for a second year, and then a third. By year four, you're beginning to wonder whether you've stumbled upon a megatrend, and by year five, you're certain of it.

And so it is that today we're going to take our next logical step. Moving on from stocks that have hit 52-week highs, we'll identify for you the companies that are entering their second half-decade of outperformance. Which of these will go on to thrash the market averages for another five years? Here are this week's leading contenders:

 

Recent Price

CAPS Rating (out of 5):

Bull Factor

Atwood Oceanics  (NYSE: ATW  )

$110.64

*****

99% bullish

National Oilwell Varco (NYSE: NOV  )

$89.96

*****

98%

Oilsands Quest (AMEX: BQI  )

$6.07

*****

97%

Goodrich Petroleum  (NYSE: GDP  )

$70.08

***

88%

First Solar (Nasdaq: FSLR  )

$290.13

**

73%

Companies are selected from the "New 5-Year Highs" list published on MSN Money on Thursday. CAPS ratings from Motley Fool CAPS.

Everybody loves a winner
Spotting a megatrend in the making is tricky, but once the trend's become firmly established, it's a piece of cake. Need a hint? Three of the five stocks listed above receive perfect five-star ratings from CAPS players. Most of the above companies occupy places in the oil patch, and the only one that doesn't (First Solar) shines brighter the higher oil prices rise.

Top marks in the group go to Atwood Oceanics, with 99% of CAPS players expecting it to outperform the market going forward. Yet this Motley Fool Stock Advisor recommendation is the only one of the five that doesn't immediately make you think "energy" when you read the name. So what does Atwood have to do with the global energy boom, and why do investors love it? Let's find out.

The bull case for Atwood Oceanics
Three of our All-Star CAPS players have set out "buy" theses on Atwood that, when combined, read as short they do sweet. Here's what they have to say:

  • Sqwii: "Energy stocks are going through the roof and energy producers having a ball, Atwood Oceanic ... are the ones who build Oil barges and other oceanic drilling equipment and rather than take the risk of a dried up well, they simply lease their rigs to those who hit the jackpot. As oil prices rise, so does the price drillers are willing to pay to rent the drilling equipment, so Atwood enjoys the upside and in fact, have a backlog of orders-their barges are booked for the next 2 years! That means oil can go down to $100 a barrel and Atwood will still be raking in the profits."
  • iMarket goes one better: "Drilling is just where its at nowadays...you know it and I know it. Whether we pay $50, $100, or $200 a barrel they will keep digging for dollars...Nuff Said."
  • But with a plethora of high-quality drilling firms like Nabors Industries (NYSE: NBR  ) and Patterson-UTI (Nasdaq: PTEN  ) to choose from, why should we buy Atwood in particular? cheftms argues: "The dramatic rise in the price of oil is driving exploration of deep sea sites ... only a limited number of companies provide the equipment to support this deep water drilling."

I have to admit that the logic seems ironclad. And at this price, it's hard to see how investors could fail to lock down profits with this investment. Atwood sells for a slight market premium -- 22 times trailing earnings. But the dozen analysts who follow the firm are convinced that Atwood can grow its profits at 32% per year or better over the next five years.

If they're right, and if we're right, Atwood's five-year high could be only the beginning.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Atwood, or what other CAPS players are saying. We want to hear your thoughts. Head on over to Motley Fool CAPS and tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

To learn whether Motley Fool Stock Advisor agrees with Rich's scenario, claim your free trial today.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 2,522 out of more than 110,000 players. The Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 26, 2008, at 5:11 PM, Aviator409 wrote:

    BQI ---Oil sands Quest. I've owned it for quite some time. The spec is that they will have the largest oil reserves outside Saudi Arabia. That's a big claim. Drilling has been very positive. Cramer ( I am not a favorite of his) I heard said that this should be valued at 3 times the current price based on value of leases in today's market. This company secured many acres before the big guys ever heard of saskatchewan. Its certainly a spec, but drilling results are demonstrating the credability of management.

    Aviator 409

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