Stocks climbing to 10 times their original price are rare breeds -- but they're not impossible to find. Especially when you have Fools for friends.
The market's best stocks include companies that have risen dozens 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 firms can help you establish a winning portfolio.
Stalking the monster
To find tomorrow's winners, we'll enlist the more than 125,000 monster-trackers at Motley Fool CAPS. We've compiled a list of the most successful CAPS members, 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.
CAPS score = how many points the pick is beating the S&P 500 since the time of the pick.
Of course, this is not a list of stocks to buy -- or, for those monster stocks that our CAPS All-Stars have already found, stocks to sell. Just consider them starting points for your own further research of potential extreme buying opportunities.
In search of Bigfoot
The waning days of 2008 were a period of cataclysmic change in the U.S. commercial real estate market. According to a report by the MIT Center for Real Estate, prices of commercial real estate sold by major institutional investors fell by almost 11% nationwide in the fourth quarter, and by 15% for all of last year.
The Dow Jones U.S. Real Estate Index, which charts the performance of real estate investment trusts (REITs), did even worse, dropping 40% in the fourth quarter. The index reflects trends in leasing rates for commercial property, as well as valuations arising from development costs, vacancies, and transaction values.
The MIT index, which is somewhat different from the Dow Jones index, suggests that commercial values held up better than the market as a whole did. So if you think real estate will lead the recovery, it might be time to start investigating some of the components.
However, if you think the balancing act that General Growth Properties (NYSE: GGP ) is performing on the brink of bankruptcy is only a sign of more trouble to come, or that mall operator Simon Property Group (NYSE: SPG ) will suffer a real crisis as retail stores close, the UltraShort Real Estate ProShares exchange-traded fund might be the way to go. It seeks to double the inverse of the daily performance of the Dow Jones U.S. Real Estate Index. In short, if the real estate index falls another 10%, the ETF seeks to be up 20%.
And there's probably a good case to be built that office buildings, shopping malls, and industrial sites have not yet hit bottom. Despite the brief rally that the retail sector saw in January -- sales rose 1% for the month -- it's likely that consumer spending is going to remain constrained for the foreseeable future.
Moreover, a string of retailers like Circuit City, Linens 'n Things, and Sharper Image filed for bankruptcy protection last year. Even those not in danger are reducing their number of stores. An investor could do well by betting that we'll see more malls turn deathly quiet.
Now, these "ultrashort" ETFs aren't the best investment vehicles for all investors because of their volatility. CAPS member hateninja isn't a supporter of such ETFs, but thinks that commercial real estate is going to be the next big catastrophe, and that the UltraShort Real Estate ProShares fund should do well:
I'm not a fan of these ETFs but I live in Phoenix. Am ... seeing the effects first-hand of an economy buying too much stuff it does not need. Amazingly, junk stucco housing at 300-500k a pop was also included in that. Commercial [real estate] is next to take a huge hit, and the [mainstream media] has not been doing a good job reporting all of this.
A chance for scary growth
It takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions, so start your own research on these stocks on Motley Fool CAPS. You can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. And while you're there, weigh in with your own thoughts on whether you think these are tomorrow's monster stocks.