In music they're called one-hit wonders, singers who belt out tunes but are never able to regain the magic of their big hit song. Think Norman Greenbaum's "Spirit in the Sky" or Brownsville Station's "Smokin' in the Boys Room." Monster hits never to be repeated.
We have seen similar one-hit wonders in stocks, too, like Pets.com or drkoop.com. Companies that burst onto the scene -- many during the tech bubble heyday -- and never live up to the promise they held.
Whole lotta shakin' going on
While nostalgia's fun, "10 Stocks Shaking the Market" isn't about finding stocks that can't repeat their success, it's about looking at those that have made big moves and are likely to continue doing so.
To do that, we're looking at the 10 stocks that made some of the biggest moves up yesterday. We'll then pair those with the ratings issued by our Motley Fool CAPS community. Those that rate higher suggest that members believe they'll continue to move higher in the future and outperform the market.
In the first 20 months since we first began tracking the collective intelligence at CAPS in late 2006, the data shows that newly minted five-star stocks offer the best opportunities for investors, while the lowest-rated companies fared the worst. Four-star stocks outperformed the market by seven percentage points, and five-star stocks -- top honors in CAPS -- did even better.
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Stock
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% Change Yesterday
|
CAPS Rating
|
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Solarfun Power (Nasdaq: SOLF )
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35.08%
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***
|
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Sprint Nextel (NYSE: S )
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27.80%
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**
|
|
Trina Solar (NYSE: TSL )
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25.64%
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**
|
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Gushan Environmental Energy (NYSE: GU )
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25.26%
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*****
|
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Evergreen Solar (Nasdaq: ESLR )
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23.75%
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***
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LDK Solar (NYSE: LDK )
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23.20%
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****
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Gevity HR
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21.99%
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**
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China Sunergy
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21.22%
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**
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YRC Worldwide
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19.87%
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***
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Universal Insurance (AMEX: UVE )
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16.79%
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****
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Surprisingly, these stocks are generally viewed relatively unfavorably by the members of CAPS, as most have two or three stars. So we'll spend our time today discussing two of the companies earning a four- or five-star endorsement.
LDK Solar
Contrasted against the polysilicon shortage that was hitting solar companies for much of last year and this year, the report that prices of the key component for many solar company products has fallen by as much as 30% over the past three weeks is welcome news. LDK Solar was not the only solar player to get a boost -- Trina Solar and Solarfun also enjoyed a nice ride.
CAPS member ncycling saw that there were three events that needed to occur for LDK to advance, one of which was a reduction in costs. With polysilicon prices now in retreat, will the other two get triggered?
Three things that need to happen for this stock to be a winner:
- Advance in technology
- Reduced manufacturing cost
- Continued demand
At some point, there will be an economic benefit to purchasing solar cells for mass renewable energy. In 2-4 years? I can't wait to see.
Gushan Environmental Energy
When a government mandates that people use the product you produce and also gives you heaps of tax breaks that bolster your bottom line, it might be time for investors to take a closer look at you. Such is the case with biodiesel producer Gushan Environmental, which finds itself in the enviable position of having the Chinese government mandate the use of 5 million tons of biodiesel by 2015, while also possibly receiving aid for R&D expenses. CAPS member msidemrader finds Gushan so cheaply priced that fluctuations in foreign currency exchange rates might be enough to propel the stock forward:
This is a probable home run. An energy recycling company in the world's largest economy. They do biodiesel, which is just fancy wall street speak for filling up your truck on leftover McDonald's grease, or the Chinese equivalent . . . At a 5 P/E, this baby is going to make hay just on currency exchange movement if nothing else!
As at least one analyst has noted, Gushan has $2 per share in cash, $1 per share in estimated earnings for 2008, and no long-term debt. Other analysts are expecting 76% earnings growth this year, 47% next year, and 15% in long-term earnings growth. If you think that sounds like a winning combination, join me over on Gushan's CAPS page to rate the biodiesel maker an outperform.
Shake, rattle, and roll
With these stocks shaking the market yesterday it pays to start your own research on them at 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.
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