Corning: 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 who have successfully picked stocks that have doubled, tripled, or even quadrupled in price. This week, All-Star member CNBL gives us glass specialist Corning (GLW 0.45%) as his next monster pick. He made his mark with Teck Resources (NYSE: TCK), which surged more than 750% after he picked it to outperform the S&P 500, which rose "only" 76% in the same time frame.

Of course, you shouldn't jump into the breach just because an All-Star stock-picker did. Just consider this as a starting point for your own research of extreme buying opportunities.

Corning snapshot

Source: FinViz.com.

No more monkey business
There's little doubt Corning's hit a rough patch. With the economy still weak, consumers aren't buying as many flat-screen TVs, and with the display technologies division accounting for 37% of revenues, it's going to have a tough time bouncing back. There just aren't enough smartphones being made to compensate for the drop in TV sales. While the Gorilla Glass segment sales surged 21% year over year, display technologies fell 6%.

OLED developer Universal Display (OLED 9.28%) finds itself similarly situated: dependent on TVs, but coasting until recently on the expansive nature of the smartphone industry, it suffered a meltdown when lowered guidance sent the stock tumbling.

Well, I'll be a monkey's uncle
While there's a risk to both should smartphone sales weaken, Corning has to take extra care a new technological advancement doesn't replace its signature product. Where OLEDs are the next big thing, LED sapphires could supplant Gorilla Glass as a stronger, cheaper alternative.

GT Advanced Technologies (NASDAQ: GTAT), in addition to its flailing solar business, is a leader in manufacturing sapphires for use in smartphones and TVs. Still in its infancy and amounting to just 11%, or $12 million, of GT's total revenues last quarter, sales surged 50% from the year-ago period. GT previously said it's working with major smartphone manufacturers and is looking to 2013 for the business to really take off.

Yet amid Corning's gloom there is hope. With nearly $5 billion in cash sitting in the bank and less than $3.5 billion in long-term debt, the glass maker has some serious capital at its disposal to make acquisitions like the life sciences labware business it just bought from Becton, Dickinson (NYSE: BDX) that should expand the segment's annual revenues by 40%. Yet margins will be razor-thin because it will be only slightly accretive to 2013's earnings, as tough competition from 3M (NYSE: MMM), Tyco Electronics (NYSE: TEL), and others pressure pricing. Still, Corning has the financial wherewithal to make more such acquisitions to shore up any deficiencies in its operations.

King Kong Corning
Where I expect Corning is really going to surprise Wall Street is in the recovery of its telecom business. Corning's second largest operating segment has been sagging under the capex spending freeze carriers initiated (sales were down 7% from 2011), but we've probably witnessed the bottom.

While Verizon's (NYSE: VZ) FiOS network has been largely deployed, AT&T (T 0.18%) just announced that it will spend $14 billion over the next three years to build up its 4G/LTE network, including rolling out fiber-optic cable to an additional 1 million business customers, enabling high-speed Internet access for 75% of its customer base. Sprint Nextel (S) will probably use Softbank's massive $19 billion cash infusion to help it further build out its network if for no other reason than to help maintain the iPhone community it worked so hard to get.

All this won't materialize in a quarter or two, but at just eight times earnings estimates and trading at a 25% discount to its book value, Corning is cheap. Its enterprise value also goes for just 12 times the free cash flow it generates, meaning at around $11 a share, investors are looking at a monster opportunity here. Wall Street, in my opinion, is just monkeying around if it doesn't recognize this chance.