Stocks that climb to 10 times their original price are a rare breed. But they're not impossible to find, especially when you have Fools for friends.
The market's best stocks have risen dozens of times in value over the past decade. These aren't penny stocks; they're viable companies that have sound business prospects and achieve phenomenal returns every year. Finding just one or two of these monstrously successful companies can help you establish a winning portfolio.
Stalking the monster
To find tomorrow's winners, we'll enlist the 115,000 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.
Of course, this is not a list of stocks to buy -- or, for the monster stocks that our CAPS All-Stars have already found, to sell. Just consider them starting points for your own further research of extreme buying opportunities.
In search of Bigfoot
American Capital's motto is "We invest in private companies; you invest in us." But that focus on privately held companies has introduced some murkiness in estimating the company's earnings prowess. The market is punishing the stock because of that uncertainty: Shares are trading more than 50% below their 52-week highs. But CAPS All-Star junkopadna sees that reaction as a classic case of throwing the baby out with the bathwater:
The stock has been punished severely because it is a "financial," and has had to write down some of its holdings because of the new accounting laws. ... They have to carry their holdings as "market value," even though there is practically no current market for them and they have no intention of selling now. They will continue to hold them until maturity, and they will continue to perform. One can well expect that these "write downs" will be written back up in future when they do come to maturity. It has been punished along with all the other stocks in the financial sector, yet it is much less leveraged than all the banks, and has virtually no [exposure] to residential subprime loans.
Silver Wheaton is also getting pummeled -- its shares are also off more than 50% from their highs. Its problem, though, isn't opacity. Lower grades of silver from Goldcorp's (NYSE: GG ) mines have tarnished its earnings. Yet with some serious growth projected for the next few years and a fragile financial system that seems all too willing to keep silver prices up, Silver Wheaton could reclaim those highs.
CAPS member contrariankiwi sees the company as possessing lower risks than other miners carry. This investor also points to Silver Wheaton's additional interests in other productive mines -- such as Lundin Mining (NYSE: LMC ) -- and reminds us that its product enjoys more uses than gold does: "Silver Wheaton has a good set of royalty lines to mines from a variety of producers which limits its production risks. With silver likely to outperform gold due to its lower price and industrial uses, [Silver Wheaton] will have a bright future."
Meanwhile, unlike homebuilders in the U.S. housing market, Brazilian builder Gafisa doesn't face the same dangers that buyers will incur too much debt through risky mortgage programs. The average mortgage in Brazil covers just 60% of the value of the home, compared with 90% here. With pre-sales growing by 62% in the latest quarter, Gafisa has pent-up demand to keep its foundation secure. CAPS member joerancho67 sees Gafisa as being in the right place at the right time: "These guys are actually doing something right ... take a look at [the] web page and do a virtual tour of [the] apartment floor plans -- WOW these things are pretty high end. They are [building] what people want."
A chance for scary growth
It pays to start your research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Then weigh in with your own thoughts, and let's hear whether you think these are tomorrow's monster stocks that have been uncovered today.
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