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.
I summoned our Motley Fool CAPS community to point out a few four- or five-star stocks that have been going gangbusters in recent months. Some are still bargains; others are getting ahead of themselves.
While they're not formal recommendations, these three-month bloomers still caught my attention:
|
Company
|
13-Week Price Change
|
Recent Share Price
|
Forward P/E Ratio
|
CAPS Rating
(out of 5)
|
|
American Eagle Outfitters (NYSE: AEO )
|
22%
|
$17.58
|
16.9
|
****
|
|
Akamai (Nasdaq: AKAM )
|
34%
|
$22.45
|
13.9
|
*****
|
|
Cliffs Natural Resources (NYSE: CLF )
|
30%
|
$35.46
|
14.5
|
****
|
|
Holly (NYSE: HOC )
|
36%
|
$28.55
|
9.0
|
****
|
|
Walgreen (NYSE: WAG )
|
22%
|
$38.71
|
14.1
|
****
|
Data from Motley Fool CAPS, and Yahoo! Finance as of Nov. 2.
You can rerun the CAPS screen I used by clicking here.
A closer look at American Eagle
American consumers are in deep, deep, trouble, and they ain't coming out anytime soon. We had a debt bubble that fueled a consumption bubble that fueled a things-we-don't-need bubble, and now it's all coming back to bite us. Hard. Our national debt-to-income levels suggest that it could be years before we're back in the game.
But I can still see why so many investors love clothing retailer American Eagle Outfitters. Why? Let's count the ways.
Trading down
"Like any commodity that becomes overpriced, there eventually comes a market correction. And denim's day of reckoning was long overdue" wrote The New York Times last week. That means there's an army of buyers, once hooked on outrageously priced clothing, who now need something to fall back on.
American Eagle -- cheap, but not embarrassingly so -- could be their answer. It's the same benefit that retailers like Wal-Mart Stores (NYSE: WMT ) and Costco (Nasdaq: COST ) are enjoying: Someone else's loss is their gain.
Ironclad balance sheet
No long-term debt. More than $529 million, or $2.55 per share, in cash. Enough said. As retailers around the world squirm over the possible fallout after big-time retail lender CIT's bankruptcy, American Eagle primarily relies on itself to fund operations. One less thing to worry about, in an industry where there's already plenty to fret over.
Insider ownership
Chairman Jay Schottenstein owns more than 14 million shares, or just less than 7% of the company. If you want to know why American Eagle's balance sheet might be so darn conservative, that's probably your answer. As Motley Fool co-founder Tom Gardner wrote yesterday about insider ownership, "You'd be amazed by how closely correlated it is with stock market success, and yet it is still overlooked by the majority of investors."
Our CAPS community loves it
American Eagle carries a four-star rating, which is about as much love as you'll find for a retailer amid the biggest consumer retrenchment in generations. Of the 2,516 members rating this stock, more than 93% tag it as an outperform. One of those members is AllStarPortfolio, which aggregates picks from high-ranking CAPS members, which offered this in May:
It has a very strong balance sheet with no long term debt. Their current cash position covers their entire current liabilities. They're one retailer that should be able to weather an extreme downturn due to the strength of their financials. When the economy eventually recovers they should come out stronger than their rivals.
Your turn to chime in
Have your own take on American Eagle? More than 140,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.
For related Foolishness:
RSS Headlines
Fool UK