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 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)

Quaker08 98.90 Zweig Fund 312.11 Arena Pharmaceuticals (Nasdaq: ARNA  ) **
schmacko 97.27 Ecopetrol 230.60 Nokia (NYSE: NOK  ) **

Score is by 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.

Focusing on the future
Now that Arena Pharmaceuticals has made the improbable journey to FDA approval for its fat-fighting drug Belviq (lorcaserin), let's look at exactly what that means for the biotech, and for VIVUS (Nasdaq: VVUS  ) and Orexigen Therapeutics, both of which are also seeking regulatory approval for weight-loss therapies.

One-third of the U.S. population obese and another third is overweight, contributing $168 billion in medical costs. While there is risk in taking Belviq -- that's the reason the FDA rejected it the first time around in 2010 -- it needed to be weighed against the health risks associated with obesity, and the scales tipped in favor of the drug. Arena was able to overcome resistance after showing it didn't cause heart valve problems, which was what doomed the notorious last fat-loss wonder drug, Fen-Phen. With post-marketing studies on the bill, regulators will keep a close eye on Belviq.

My concern with Arena's growth prospects is on the limitations that have been set. It's targeted only to those with a body mass index greater than 30 (and a few other special cases), so couch potatoes won't be able to reach for this instead of opting for a healthy diet and exercise, and those who were studied lost only 3% to 5% of their total body weight after a year. Hey, for the obese, that could be just what they need to start, but it doesn't magically melt the pounds away, which may be what patients hope for or expect.

Investors may end up being disappointed if sales don't take off as fast as they anticipate, which is what happened to Human Genome Sciences (Nasdaq: HGSI  ) after its lupus treatment Benlysta became the first drug approved for the illness in more than 50 years. I see gains for Arena, but perhaps not the stratospheric leaps forward that its most ardent adherents calculate.

With its stock up 400% so far this year, much of the gains to be realized may have already been baked into the price. So I'm rating Arena to underperform the market, but with an eye toward changing that after much of the euphoria of approval wears off. Add Arena to your Watchlist, and then let me know in the comments section below or on the Arena Pharmaceuticals CAPS page whether you think differently about its chances.

Disconnecting from common sense
As much as I see Arena having a profitable future (though perhaps not so profitable as the bulls think), I can't say the same for smartphone maker Nokia, which has essentially gone all-in on Microsoft's Windows Phone 8 for its survival. If the bet doesn't pay off big, it will probably go the way Research In Motion (Nasdaq: RIMM  ) is heading with the BlackBerry and the delayed BB10 operating system, which is to say nowhere.

Between the iPhone and Samsung Galaxy, Nokia has been left behind. They stumbled badly several years ago with failures to introduce models that were popular with consumers and coasted by resting on their laurels of being the world's biggest handset maker. Too late did it start trying to innovate, and now the smartphone market has passed it by. Like RIM, it is trying to make up for lost time by announcing a willingness to sell part of itself to the highest bidder: RIM wants to spin off the BlackBerry division, and Nokia wants to sell some of its patents.

Yes, it could generate some cash, but when a company is reduced to finding salvation in selling the soul of its business, it doesn't really have a future left. Even those who see the potential for Nokia to increase its share value, like CAPS member huddaman, they aren't betting on any real long term success:

Business is on a decline and will likely burn cash. I hope they don't burn too much and pull the plug before that. Their liquidation value appears to be more than the current market cap. Either they should liquidate or get lean. I believe they are trying to do the latter for now.

Add the one-time smartphone icon to your Watchlist to keep track of its death throes, and then let me know in the comments box below or on the Nokia CAPS page the value you'd place on its stock today.

A chance for scary growth
Smartphones were an amazing revolution, and there's still growth left when you choose the right companies, but The Motley Fool sees a new technological breakthrough coming, and it's found one company that's leading the way. Download your free copy of "The Only Stock You Need to Profit From the NEW Technology Revolution" and find out which stock will be changing the face of business. Did I mention it's free? Get your copy today!

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (4) | Recommend This Article (11)

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 04, 2012, at 5:23 PM, steamoil wrote:

    how could you even make a comparison between Lupus and obesity. Maybe 1 person in 200000 has Lupus ,. But 1 person in 10 is obese. So which drug do you think will be more widely used ?You've got 1 second to answer. Bingo.You should have started your 4th of July holiday earlier instead of writing this nonsense.

  • Report this Comment On July 04, 2012, at 7:45 PM, mindchanger wrote:

    Living in rural Jamaica I can't see Nokia go the way of RIMM. While Blackberrys were the phones everybody dreamed of, but couldn't afford, settling for cheap copies, Nokia phones are still the top quality phones for everyday use. Smartphones for many are hardly affordable yet. I assume the same is true for large parts of Africa and rural South America, so that Nokia should have some time selling their cheap phones until they catch up with their own development of Android or Windows 8 phones. My bet is at least a price of $ 10.00 for Nokia early next year. To lock into my prediction I bought a bundle of Nokia yesterday. Let me know if you have a better bet.

  • Report this Comment On July 04, 2012, at 9:54 PM, webmind wrote:

    "those who were studied lost only 3% to 5% of their total body weight after a year. Hey, for the obese, that could be just what they need to start, but it doesn't magically melt the pounds away, which may be what patients hope for or expect."

    These FUDsters just don't quit, do they? The same spin mantra of 3%-5% weight loss which is simply incorrect. And the drug isn't "magic" so watch out!

  • Report this Comment On July 04, 2012, at 11:52 PM, genesis667 wrote:

    I've never known a single person EVER that's had Lupus, but I know at least a hundred people that are more than a few pounds overweight.

    I'd suggest this article writer take a trip to the local mall and do some observing. Most everyone is HUGE.

    Much like ARNA is going to be.

    As for the drug being magic, I take two other scripts and they aren't magic either but I still buy them. Get a clue!

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