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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 180,000 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)

mkeszler

98.80

Baidu

1047.30

Entropic Communications (Nasdaq: ENTR  )

***

gtfann

99.43

Rockwood Holdings

492.95

Lender Processing Services (NYSE: LPS  )

*

ut84088

94.37

Atlas Pipeline Partners

435.44

Samson Oil & Gas (NYSE: SSN  )

*****

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.

Get a backbone
Home networking chipmaker Entropic Communications has made it easier for consumers to effortlessly connect their electronic devices to the Internet. With analysts at DisplaySearch expecting the 60 million connected TVs this year to mushroom into 500 million in 2015, investors are looking for the fabless semiconductor company to reap a lot of the business.

Motorola Mobility (NYSE: MMI  ) accounts for 17% of 2010's revenues and partnerships with services providers like Verizon (NYSE: VZ  ) and DirecTV enable Entropic to facilitate the delivery of multiple streams of HD video and other multimedia content throughout the home.

CAPS member mdea thinks the ubiquity of connectivity means Entropic will generate big gains in the future:

DVRs have become as normal as PCs and with the ability to record once from one DVR and view from any room is a step in the same direction. ENTR has it's finger on the pulse in this arena and will reap the benefits.

Analysts are expecting earnings to more than double from the year ago period on a 60% increase in revenues, with profits up 42% for the full year. But some investors are betting on a miss as more than a third of the stock's shares are sold short. Look for a short squeeze if they meet or beat expectations. The economy is a risk factor as cautious consumers may postpone big purchases, but any weakness in the share price should have investors looking more closely at Entropic.

Let us know in the comments section below or on the Entropic CAPS page whether you think the connected living room still holds promise.

In search of Bigfoot
Though flying under Wall Street's radar, Samson Oil & Gas is proving popular with investors, and there's good reason they have high expectations for the future. Samson's got comparatively large exposure to the Niobrara oil play through its Hawk Springs project, but it also has the Bakken, where it recently acquired 20,000 acres with an option to buy 70,000 acres more.

The oil and gas driller has plans for a busy second half of the year with a multitude of new drilling programs. It's expected Samson will exit the year with more than $32 million in cash -- excluding cash flows from the new activity! That's a sharp reversal of fortunes when it had to sell almost 23,000 acres of Niobrara acreage to Chesapeake Energy (NYSE: CHK  ) to pocket some coin. At the time, it had less than $6 million on the books.

CAPS member wilba56 thinks Samson has the location, the drive, and the backing to soar higher, but you can follow along by adding the adding the driller to your watchlist and see whether it can find the growth it's looking for.

Totally awesome
Considering how bad the housing market is and the likelihood of it coming back anytime soon shrinking fast, you'd expect Lender Processing Services to be taking off. Instead it revised guidance downward, its CEO is resigning (for health reasons), and it sits 42% below its 52-week high.

Unfortunately, the mortgage meltdown and the subsequent "robosigning" scandal that enveloped Bank of America, JPMorgan Chase (NYSE: JPM  ) , and Citigroup has caught Lender Processing for its role in the foreclosure mess. State attorneys general are piling onto probes the federal government is undertaking making the call to short the processing specialist last December by Rising Star portfolio analysts a rather prescient one.

CAPS All-Star hey4ndr3w says there's a big, steaming pile of uncertainty sitting on Lender Processing's doorstep:

Michigan's attorney general announced that he issued a criminal investigative subpoena against LPS. And last week we learned that the foreclosure problems are having a financial impact on LPS. Because of the investigations that involve LPS and many major mortgage companies, lenders have slowed down the pace of foreclosures.

Though like Entropic it has a high short interest, there seems to be good reason. Tell us on the Lender Processing Services CAPS page if you agree there will be more pain before any gain.

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 marvel at the range of opinions there.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

The Motley Fool owns shares of JPMorgan Chase. The Fool owns shares of and has opened a short position on Bank of America. The Fool has opened a short position on Lender Processing Services. The Fool owns shares of and has written puts on Rockwood Holdings. Motley Fool newsletter services have recommended buying shares of Baidu and Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Fool contributor Rich Duprey owns shares of Motorola Mobility but does not have a financial position in any of the other stocks mentioned in this article. You can see his portfolio here.


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.

  • Report this Comment On July 13, 2011, at 5:05 PM, pie77 wrote:

    Points to Consider:

    This company is profitable with growing revenues. There are significant growth opportunities in their market. The stock is attractive from the fundamentals perspective, but what is making this stock even more interesting is the massive short position in the stock. According to Yahoo Finance, 30 million shares are currently shorted. This figure is more than a third of the float. This kind of short position in a company that has growing revenues, is profitable, and is in a market with great growth opportunities brings to mind one thing – A SHORT SQUEEZE.

    The short squeeze on this stock will happen by the end of July, in my view.

    The company has just been added to the S&P Smallcap 600. The shorts are thinking it might be a good time to close out their short positions.

    Motley Fool:

    I'm pretty sure you can see how this plays out. Wall Street calls this cycle a "short squeeze." And innovative companies with a history of surpassing market expectations can create the mother of all short squeezes.

    The perfect storm:

    With earnings season right around the corner, there will be opportunities for good news to create a short squeeze. And looking at the historical numbers, there's a good chance that Entropic could report strong earnings and see their shares jump. Just look at the consecutive quarters in which Entropic has beaten analysts' earnings estimates, and by how much.

    Consecutive Beats

    Average Beat

    Entropic Communications 11 and 27%

    Facts About the Company:

    1. The CFO stated that there is enough organic business to produce a 400% increase in revenues over the next few years.

    2. The CFO also stated that ENTR expects to achieve scale, which he described as 500 mil to 1 billion in revenues.

    3. Moca 2 , their new, popular product has no competition.

    4.The Operating Margin Model is gaining scale. There is plenty of growth to maintain a high growth

    operating margin: Example; Up about 600% last year:

    5. There is no seasonal softness in the second half.

    Symbol ENTR Information at Entropic.com

  • Report this Comment On July 13, 2011, at 5:52 PM, fvbridges wrote:

    With what little money I have to invest, I am long in SSN. Our local oilfield companies say good things about SSN. I am additionally long in BRD-Brigus Gold. It's a small gold mining company in Canada with some recent finds on their property.

  • Report this Comment On July 14, 2011, at 4:10 AM, steveonyx wrote:

    Yes. I'm in violent agreement that Entropic will be a monster stock in what remains of 2011, through 2012, and into 2013. There has been massive innovation with the smartphone to make phones much more functional for the consumer. Then Apple lit the world on fire by making the user experience of a computer much better with the iPad device. But what about the television? The rate of innovation in this space has been horribly unimaginative. But that will change and Entropic will lead the change as either an independent company or as a subsidiary of QCOM, Apple, or another leader in the space.

    And to make the investment an even better one, a short squeeze on Entropic will allow you to capture an incredible return through the purchase of call options.

    Check out what we are doing at Onyx Investing at www.onyxinvesting.com. Entropic is one of our favorites right now.

    Thanks Motley Fool for giving Entropic some visibility.

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Related Tickers

5/25/2012 4:01 PM
LPS $23.22 Up +0.62 +2.74%
Lender Processing… CAPS Rating: **
ENTR $3.53 Up +0.08 +2.32%
Entropic Communica… CAPS Rating: ***
MMI $0.00 Down +0.00 +0.00%
Motorola Mobility… CAPS Rating: ***
VZ $41.45 Up +0.06 +0.14%
Verizon Communicat… CAPS Rating: ****
CHK $15.81 Up +0.23 +1.48%
Chesapeake Energy… CAPS Rating: ****
JPM $33.50 Down -0.47 -1.38%
JPMorgan Chase & C… CAPS Rating: ***

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