In my weekly Fool column "Get Ready for the Fall," I run Nasdaq.com's 52-week highs list through the "wisdom of crowds" meter we call Motley Fool CAPS. The result: a list of stocks that have flown so high, investors are starting to get nervous about that whole "gravity" thing. But while many stocks will indeed plunge back to Earth, some seem immune to gravity, steadily riding a megatrend to ever-greater heights.
Today, we'll move beyond stocks that have hit 52-week highs, and identify companies now surpassing five solid years of outperformance. Which of these will thrash the market averages for another half-decade? Here are this week's leading contenders:
|
Company
|
Recent Price
|
CAPS Rating
(out of 5)
|
Bull Factor
|
|
Knight Capital Group (Nasdaq: NITE )
|
$22.71
|
****
|
96%
|
|
Express Scripts (Nasdaq: ESRX )
|
$79.44
|
***
|
93%
|
|
Medifast (NYSE: MED )
|
$22.38
|
**
|
82%
|
|
Alpha Pro Tech (AMEX: APT )
|
$6.63
|
**
|
88%
|
|
Interoil (NYSE: IOC )
|
$44.81
|
*
|
44%
|
Companies are selected from the "New 5-Year Highs" list published on MSN Money on Monday. CAPS ratings from Motley Fool CAPS.
The Dow's flirting with 10,000 again, and alarm bells are tripping as stocks we've never heard of before ("Alpha Pro Tech?" Really?) lurch frantically upward.
But not every high-priced, never-heard-of-it-before stock has Fools equally worried. CAPS members are singing the praises of one equally obscure company…
Knight Capital Group
All-Star investor jfjf88 introduced us to Knight three years ago as: "a stock exchange sitting inside a company, and … the largest trader of Nasdaq stocks." In addition to its "automation and a strong technical trading platform … NITE has a hedge fund, Deephaven, which manages nearly $3 billion of funds. NITE has diversified into electronic trading of bonds and foreign exchange."
Yes, you read that right. Knight is apparently a third stock exchange. But don't just take jfjf88's word for it (or mine). Knight itself names Nasdaq OMX (Nasdaq: NDAQ ) and NYSE Euronext (NYSE: NYX ) as its principal competitors.
Unlike these famed names, CAPS All-Star Capsperson tells us: "Knight Capital operates under the radar, which is what I like about them. Just slow and steady with hardly any debt…"
And as another of our All-Stars -- bizcbug7 -- points out, Knight's: "Financial comps [are] favorable vs NASDAQ ... Low debt [0.1] vs 0.5 industry....cash exceeds debt. Fast grower."
How fast, you ask? Over the past five years, Knight Capital has grown its annual profits at a 34% clip. Such heady growth can't last forever, of course, but the 10 or so analysts who track the stock foresee 14% growth compounding over the next five years -- faster than they predict NYSE will grow, and almost as quick as the Naz. With a P/E of less than 13, and a PEG ratio consequently coming in under 1.0, Knight's price looks right nice. (Say that five times fast.)
And Knight has other advantages over its rivals. For example, while both NYSE and Nasdaq carry hefty debt loads, Knight is sitting on more than $1 billion in net cash. It's also profitable in a business where NYSE is losing money, and its profit margin is nearly twice as fat per dollar of revenue as Nasdaq's. (Did someone say "acquisition bait?")
While I may not have noticed Knight Capital before today, I have to believe that this company's cash-rich balance sheet and ultraprofitable income statement are turning heads in the corner offices of Nasdaq and NYSE. Considering how acquisition-hungry both firms have proven themselves in the past, it seems likely to me that Knight's on their radar.
Time to chime in
Of course, I could be wrong. Fortunately, I've got you to quality-check my assumptions -- so here's your chance to clue a Fool in. Take a look at Knight now, and see whether the numbers look as good to you as I've described 'em. Then click on over to Motley Fool CAPS and tell us what you think about the company. Or heck, if you've got a more exciting stock idea -- tell us about that, too.
Motley Fool CAPS: It's fun, it's free, and it just might make you famous.
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