No one has perfect foresight, but let's be honest: The market is full of people who, as Oscar Wilde would say, know "the price of everything and the value of nothing." Far too often -- over the past year especially -- investors have been pitched sensational stock recommendations only to be left high and dry as shares crumble.
To hunt down the most highly recommended stocks that have been rewarding investors accordingly, I summoned our Motley Fool CAPS community to point out a few four- or five-star stocks that have been shootin' for the moon in recent months.
While not formal buy recommendations, these three-month bloomers caught my attention:
|
Company
|
13-Week Price Change
|
Recent Share Price
|
2009 EPS Estimates
|
CAPS Rating
(Out of 5)
|
|
ArcelorMittal (NYSE: MT )
|
52%
|
$32.49
|
$0.17
|
*****
|
|
ChinaFire & Security (Nasdaq: CFSG )
|
35%
|
$10.31
|
$0.98
|
****
|
|
GrafTech International (NYSE: GTI )
|
56%
|
$10.64
|
$0.35
|
*****
|
|
Vale (Nasdaq: VALE )
|
25%
|
$17.41
|
$1.06
|
*****
|
|
Western Union (NYSE: WU )
|
26%
|
$15.98
|
$1.27
|
*****
|
Data from Motley Fool CAPS, and Yahoo! Finance as of June 24.
You can rerun the CAPS screen I used that I used.
High-quality, little competition, and cheap
The Motley Fool's own Jeff Fischer recently penned an article for Fortune magazine, in which he scouted out five stocks he thought fit an intelligent combination of having:
- Indomitable business models with competitive moats.
- Proactive management teams who are using the recession as an opportunity to cut costs, grab market share, and emerge stronger.
- Solid balance sheets and profitability.
- Naturally recurring revenue, adding stability to the business.
- Unfairly low prices.
One of the companies he picked was GrafTech International. GrafTech is a fairly simple business in an industry that's enormously out of favor right now. It creates specialty parts primarily used in steel production. As steel production fell off a cliff last year -- see the obliteration of U.S. Steel (NYSE: X ) and Steel Dynamics (Nasdaq: STLD ) -- so went GrafTech's fat profits. Boom. Bust. That's the way things go these days.
But just like any other cyclical bust, things find a bottom and work themselves out, and that's when they create opportunities for patient investors. The time to buy high-quality cyclical stocks is when their prospects look terrible -- as they might look right now. As Jeff wrote in Fortune:
GrafTech will see its earnings soar as steel producers start to place orders again, which is likely in the coming months. The company, which has a $1.4 billion market cap, has remained profitable during the downturn, and its balance sheet is healthy. With just a few competitors, GrafTech slashed costs to conserve cash while steel producers ate through inventory. As inventory dwindles, investors need only wait a bit longer for well-managed and inexpensive (at 10 times depressed earnings estimates for 2010) GrafTech to benefit as steel mills fire up again.
Our CAPS community is equally bullish. Fully 98% of the investors rating this company expect it to outperform the broader averages. As CAPS member nrlbuild wrote back in March:
Steel production is way down as I write this and [GrafTech] stock concurrently so. But steel is not going anywhere, and will be back. Steel is one of the most important manufactured materials in the world. The company is well diversified throughout the worlds steel mills. They also sell graphite products to a host of other customers for uses other than electrodes. They are a very old company with a long track record, and I believe do not face a lot of competition. They have improving financials over the last few years including large reduction in long term debt.
Your turn to chime in
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