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.
With that in mind, 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 not formal recommendations, these three-month bloomers caught my attention:
|
Company
|
13-Week Price Change
|
Recent Share Price
|
Forward P/E Ratio
|
CAPS Rating
(out of 5)
|
|
ATP Oil & Gas
(Nasdaq: ATPG )
|
120%
|
$18.05
|
12.11
|
*****
|
|
Bucyrus International
(Nasdaq: BUCY )
|
54%
|
$53.85
|
17.04
|
****
|
|
Halliburton
(NYSE: HAL )
|
40%
|
$31.63
|
22.43
|
****
|
|
Quality Systems
(Nasdaq: QSII )
|
20%
|
$62.70
|
27.14
|
****
|
|
Yamana Gold
(NYSE: AUY )
|
31%
|
$12.61
|
20.34
|
****
|
Data from Motley Fool CAPS, and Yahoo! Finance as of Nov. 9.
You can rerun the CAPS screen I used by clicking here.
A closer look at Quality Systems
Health-care overhaul: Parts are already here, more is on the way. That's guaranteed. Like it or not, for better or worse, this industry is getting a good scrubdown.
For some, like big insurer UnitedHealth (NYSE: UNH ) , investors, perhaps rightly, are scared witless over new regulations. But for Quality Systems, cries from Washington are about as good as it gets.
Quality Systems is a leader in digitizing medical records, a significant part of President Obama's sweeping overhaul to make the system more efficient. This is a massively lucrative win for players in this industry, thanks in part to high switching costs. Once a doctor or hospital decides to go with a company like Quality Systems, changing their mind and going with someone else is a major pain -- once they're in, they're in. Sort of like Microsoft (Nasdaq: MSFT ) : Even if you like the competitor's stuff better, switching can be terribly costly, if not impossible. There's your moat. "[T]he simple fact that they kept gaining through the market crash mad me feel strong about this one" wrote CAPS member luciouscalvin earlier this year.
But great, prosperous things can become grossly overvalued. Think tech stocks in the late '90s, California homes in 2005, or the people financing Miley Cyrus' career. "Grossly" might be a harsh word to describe Quality System's current valuation, but overvalued it certainly looks to be.
Consider this: Average analyst estimates call for this company to grow at 18.22% annually for the next five years. Great, right? Sure. But shares currently trade at more than 27 times next year's earnings. Ouch. Will earnings continue to grow? Yes. Are investors absolutely, 100% anticipating and pricing in that growth to today's share price? Oh yes. Big time.
Even going out deep into the future, shares still trade at a fat multiple to earnings estimates:
|
Year
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
Analyst EPS Estimates
|
$1.72
|
$2.32
|
$3.14
|
$3.65
|
$4.18
|
Source: Capital IQ, a division of Standard & Poor's.
With a $63 share price, Quality Systems trades at about 15 times 2014's earnings. Yikes.
Warren Buffett always says "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." How about a wonderful company at an expensive price? That will do you precisely zero good. Especially since there are still bargains to be found in this market, I'd be quick to take a pass on Quality Systems.
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