Tomorrow's Monster Stock?

Stocks climbing to 10 times their original price are rare breeds -- but they're not impossible to find. Especially when you have Fools for friends.

The market's best stocks include companies that have risen dozens of times in value by taking advantage of the market's weaknesses. These aren't penny stocks; they're viable companies with sound business prospects that are achieving phenomenal returns. Finding just one or two of these monstrously successful firms can help you establish a winning portfolio.

Stalking the monster
To find tomorrow's winners, we've enlisted the help of more than 160,000 monster trackers at Motley Fool CAPS. We've compiled a list of the most successful CAPS members, dubbed All-Stars, whose picks have doubled, tripled, or even quadrupled in price. Then we've plucked out some of their recent picks for stocks they find equally promising.

Player

CAPS Member Rating

Monster Stock

CAPS Score

Recent Stock Pick

CAPS Rating (out of 5)

baseballdude

99.78

DryShips

374.81

Clean Energy Fuels (Nasdaq: CLNE  )

***

BeRadBee

98.54

Group 1 Automotive

148.28

Hovnanian (NYSE: HOV  )

*

patelk10

99.84

Dendreon

308.26

IMAX (Nasdaq: IMAX  )

***

Source: CAPS. Score is how many percentage points that pick is beating the S&P 500.

Of course, this is not a list of stocks to buy -- or, for those monster stocks that our CAPS All-Stars have already found, sell. Just consider them starting points for your own further research of extreme buying opportunities.

In search of Bigfoot
The recently unveiled Senate climate bill will unleash a torrent of job growth, according to one proponent of the legislation, though at what cost is still murky. For example, home heating bills could drop as much as $35 annually -- or rocket $136 higher. But businesses and consumers would feel the impact of the legislation as electricity rates increased 3% and gasoline cost another 5% more over the next 20 years.

One winner, though, would be Clean Energy Fuels, whose natural gas fueling stations would benefit from greater numbers of nat-gas vehicles on the road. GM, for instance just announced plans to build full-sized vans powered by natural gas for fleet owners. Fuel Systems Solutions (Nasdaq: FSYS  ) and Westport Innovations (Nasdaq: WPRT  ) , both of which make the components that allow cars to run on natural gas, could be winners too, but the bill's chances for passage are dim at best.

And that has some investors skeptical that Clean Energy Fuels can see substantial growth. CAPS member davaidesign says the industry still needs critical mass before the company can amount to much: "Unless cars start running on natural gas, I don't see this as market beater."

That's not the majority view, however, as 96% of the nearly 1,000 CAPS members rating Clean Energy Fuels indicate their belief that it will outperform the broad market indexes. A similar percentage of All-Stars feel that way, while Wall Street is unanimous that Clean Energy will clean up.

Making the connection
What the latest housing numbers tell us is something that's been possible all along: The government has artificially been building up demand with its tax credits. With the stimulus program ended, the sector may go into free fall.

New home construction surged in April, as buyers sought to beat the April 30 deadline to take advantage of the first-time homebuyers tax credit. You'd expect Hovnanian or Pulte (NYSE: PHM  ) to benefit, but permits for new home construction -- a leading indicator of demand -- plummeted 11.5%, suggesting that the tax credits simply pulled in sales from future periods.

CAPS All-Star kurtdabear finds it difficult to believe that even a builder as beaten down as Hovnanian is won't fall further still.

[Hovnanian] will show a "profit" this year as a result of tax loss carry-forwards on its horrendous losses of the last couple years. [Hovnanian]'s business operations are still running at a loss, it has negative net worth and is increasing short-term debt to cover operating losses. [Hovnanian] probably won't exist a few years down the road.

A shining example
The success of the 3-D movie spectacle Avatar has given new life to moviemakers like IMAX who see the exorbitant ticket prices charged for the experience largely fall to their bottom line. Yet the latest Shrek installment from DreamWorks Animation (NYSE: DWA  ) is likely the precursor of what we should really expect: a flood of movies that don't live up to the hype or cost.

In the end, 3-D may just be a fad as directors test new technology that while occasionally cool, generally distracts from the story being told -- and that's what a movie is really supposed to be about. Since 3-D has pulled IMAX along for the ride, if it ultimately goes dark, it may also impact the acceptance of the premium movie-going experience IMAX provides.

While CAPS member Foolishwolfe thinks 3-D and IMAX films have more room to expand, member jmhunnel says even if true IMAX's valuation doesn't support its current price:

This stock is trading at over 100 times its highest recorded earnings!!! I don't care how impressive their shows are. Their earnings, competitive advantage, and (most importantly) price for an ownership share do not impress me.

A chance for scary growth
It takes more than a few All-Star picks and a quick pitch to make buy or sell decisions, so start your own research on these stocks on Motley Fool CAPS and find other opportunities with monster potential.

IMAX is a Motley Fool Rule Breakers selection. DreamWorks Animation is a Stock Advisor pick.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1190947, ~/Articles/ArticleHandler.aspx, 11/22/2014 8:26:55 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement