All-Star Stocks

We all have our opinions on which stocks are rockets and which are dogs. If we could invest like Peter Lynch or Mohnish Pabrai, we'd probably have a lot more winners than losers in our investment ledgers.

In fact, when top-notch investors back a stock, you might want to give it more consideration. When Warren Buffett began buying railroads last year, for example, just about any company that ran on tracks came into play. Over on the investor-collaboration site we call Motley Fool CAPS, we have just such a capability. CAPS All-Stars, investors who outperform their peers consistently over time and who have achieved a player rating of 80 or better, will sometimes back a stock that others think is a dog. Considering the All-Stars' track records, we might want to look a little more closely at their selections.

Here are five companies that some investors have marked down, but that enjoy unanimous All-Star backing:

This isn't a list of stocks to buy and sell. Use it as a starting point for your own research and analysis.

A scrappy player
Few companies represent this All-Star mentality better than scrap-metal recycler Metalico. With 460 CAPS investors rating this company and not a single top player thinking it will underperform, there seems to be something beneath the surface that's attractive -- in the same way the company itself turns junk into profits.

Metalico recycles industrial and sundry scrap metal and then sells it to steel mills, foundries, secondary smelters, aluminum recyclers, and metal brokers. Although the company is probably benefiting from the soaring prices of many metals, it doesn't specialize in any particular metal but rather keeps a diversified mix that provides for greater earnings stability. How stable? Trailing revenues grew 35% over last year and have grown at a compounded annual rate of 42% over the past three years. It's also enjoyed 24% compounded growth in profits over the same time period.

Compare that performance with the one at competitor Metal Management (NYSE: MM), which has a 17% compound annual growth rate in revenues for the past three years and a compounded loss of 10% annually for the time frame.

Back in November top-rated All-Star Sinchiruna, with a 99.82 player rating, found Metalico to be a cinch for investment when the stock was trading at less than $10 a share.

MEA feels like a no-brainer here. It's a fairly small but growing entity in the scrap metals recycling industry; an industry which I feel has been overlooked by investors during this commodities bull market. (Those reading my other pitches will note that most of my picks are related to the aforementioned bull market, which shows no sign of abating [until] perhaps the price of gold and the DOW index approach each other and or cross on a chart). A friend recently suggested that metals recycling will keep provide for the increasing metal demand as prices for all the [industrial] metals continue to rise. I hadn't even thought of it, with all my focus being on the miners. While I don't believe the recyclers collectively will satisfy the demand worldwide, I do think recycling will become a burgeoning industry. This is my first and only pick in the industry so far, and I came across this one only because of an analyst upgrade some months back (08/07). It has been a high flyer so far, but recently is back down to my buy range without any company news to [explain] the action. It's a great buy IMHO under $10.

Although Metalico's stock has moved above $11, new CAPS player 5858rams finds it still attractive, because of the rising price of scrap.

Scrap metal prices have been on the up for a while. The cost of producing metals from scratch is on the up. This makes recycling scrap a better option. Metalico, Inc. has been [acquiring] other companies to expand their customer base. Scrap metal is also shipped over seas to the pacific rim countries. Metalico, Inc. also recycles as well as fabricates. They cover both ends of the process.

An all-star act
Although a few CAPS investors have bet against the house here, we haven't yet heard from you. Why not head over to Motley Fool CAPS now and let us know what you think about these and your other favorite investments? It's completely free, and along with the other 85,000 investors there, you may help uncover the next All-Star Stock.