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 145,000-member 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
|
CAPS Rating
(out of 5)
|
|
Dow Chemical
(NYSE: DOW)
|
28%
|
$27.98
|
****
|
|
Freeport-McMoran
(NYSE: FCX)
|
30%
|
$85.59
|
****
|
|
Potash
(NYSE: POT)
|
25%
|
$112.11
|
****
|
|
Silver Wheaton
(NYSE: SLW)
|
56%
|
$16.12
|
****
|
|
Yamana Gold
(NYSE: AUY)
|
46%
|
$13.58
|
****
|
Data from Motley Fool CAPS and Yahoo! Finance as of Nov. 24.
You can rerun the CAPS screen I used by clicking here.
A closer look at Dow Chemical
Last year was brutal for Dow Chemical. This was a solid blue chip -- in business for over 100 years. It paid a reliable dividend. Grandma owned it in her retirement account. It could put analysts to sleep. You know the story. Horrific things aren't supposed to happen to these companies.
And then they did. First, commodity prices soared in mid-2008, putting pressure on material inputs. Then the economy fell flat on its face, credit evaporated, and demand dried up faster than almost anyone thought possible. Earlier this year, Dow cut its dividend for the first time in 97 years. That scared investors witless -- from the peak in 2005 to the trough earlier this year, shares fell roughly 90%.
What now? Shares have shot up nearly fivefold since March. The worst of the worst fears never materialized, thank goodness. But now investors have a new worry on their hands: Are shares overvalued? Was the run-up too much, too fast, too optimistic?
Some of our CAPS members think so. One of them is UltraContrarian -- one of the highest-rated members of CAPS -- who wrote late last month:
The 326% rally off the lows is overdone. Negative tangible book, dividend cut, severely negative free cash flow. Even the typically aggressive analysts think they will only earn $1.17 per share in 2010. Find the next generation Chinese or Brazilian version of Dow Chemical circa 1947 and invest in them instead. (I didn't say it would be easy.)
UltraContrarian followed up on the pitch last week, pointing out a few small-cap chemical companies to check out in lieu of Dow Chemical. Picks include Innophos Holdings (Nasdaq: IPHS) and Chemspec International (NYSE: CPC). You can check out UltraContrarian's full CAPS profile by clicking here.
Back to Dow Chemical. CAPS members are right to be poking at future earnings estimates:
|
Year
|
2010
|
2011
|
2012
|
2013
|
|
Average Analyst EPS Estimate
|
$1.08
|
$2.00
|
$2.50
|
$3.00
|
Source: Capital IQ, a division of Standard & Poor's.
No one can see the future, so take these estimates with a grain of salt. But compare earnings estimates with today's share price of about $28. At 26 times next year's earnings, and still 14 times 2011's, to say shares are a bargain is doubtlessly optimistic. Fairly valued? Maybe. A no-brainer buy? No way.
Your turn to chime in
Have your own take on Dow Chemical? More than 145,000 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.
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