3 Stocks That Blew Away the Market

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Can earnings be managed? Sure. Even Enron was able to pull it off for a spell. Investors are well served, though, to take a closer look at companies that consistently beat profit targets. That's because there is often something fundamentally improving that even the sharp-minded community of analysts have yet to figure out. It's an opportunity in the making for those angling for an inefficient market to be ultimately corrected.

Let's take a closer look at a few of the companies that humbled the prognosticators this past week.

We'll start with Cedar Fair (NYSE: FUN). I wrote about the regional amusement park operator last week, when it was gearing up for Friday's fourth-quarter report. The company had been posting narrower Q4 deficits in recent years. That welcome trend during its seasonally lackluster period has been the result of building out its year-round resort lodging business and offering a wider range of October in-park events. Analysts were expecting the Income Investor recommendation to lose $0.12 a share.

I figured that the pieces were in place to narrow that fiscal shortcoming. It turns out that even my own optimism fell short of reality. Cedar Fair posted a profit of $0.04 a share for the period. Even if you back out certain tax benefits, you still arrive at the first December-quarter operating profit in the company's history. Nice.

American Science & Engineering (Nasdaq: ASEI) was another topper. The maker of X-ray detection devices saw earnings quadruple to $0.95 a share. Wall Street was looking for only a $0.66-per-share showing. It's easy to see how the company was positioned to crush the market. Given an elevated state of national security, American Science & Engineering has been flooded with orders from cargo shipping ports, airports, and even border patrol checkpoints.

The Knot (Nasdaq: KNOT) is the third company we'll be looking at this week. The entity behind the popular TheKnot.com wedding planning site earned $0.06 a share in the December quarter. It may not sound like much, but it was 50% better than where Wall Street was waiting to catch the bridal bouquet.

Online advertising continues to be the major driver for The Knot. Just as other niche sites like iVillage (Nasdaq: IVIL) and CNET (Nasdaq: CNET) continue to build on their profitability, the migration of offline sponsors to the Internet platform has paid off huge for the leading content sites. If you're a wedding singer, banquet-hall provider, or gown maker, you'll want to pay to be featured on the site where prospective brides and grooms turn as they prepare for that special day. It's worked out well for recent shareholders -- the stock has nearly tripled over the past year.

So keep watching the companies that lap expectations. Over time, it will be a rewarding experience for investors. That's the kind of surprise that market watchers relish in the Rule Breakers newsletter service. The strategy has paid off, too: The average Rule Breakers selection has trounced the S&P 500's market return. Want in? Check out a 30-day trial subscription.

Either way, come back next Monday to learn about more stocks that blew the market away.

CNET is a Motley Fool Rule Breakers selection.

Longtime Fool contributor Rick Munarriz is a fan of toppers. He does own units in Cedar Fair. The Foo l has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.