Drink In These 5 Top Stocks

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Whether in the corporate lunchroom, our cubicles, or the local watering hole after work, there are regular places we gather to discuss news, sports or -- if you're like us -- stocks. Here at Motley Fool CAPS, we gather around the virtual water cooler daily to rate stocks and delve into their merits as investments.

Our 140,000-member CAPS community -- where members give the thumbs-up or thumbs-down to some 5,300 stocks -- seeks businesses it thinks will outperform the market. Below, we'll take a look at some of the most popular and talked-about stocks in the CAPS universe, and examine whether you think they'll continue their winning ways.

Stock	CAPS Rating (out of 5)	No. of Calls	Outperform Calls
Arch Coal (NYSE: ACI)	*****	1,309	96%
Kinross Gold (NYSE: KGC)	***	1,329	95%
Rio Tinto (NYSE: RTP)	****	1,343	96%
Shengdatech (Nasdaq: SDTH)	*****	1,342	98%
Southwest Airlines (NYSE: LUV)	***	1,323	83%

A tall drink of water
When Fools want extra cash to pay down debt, they scrounge in attics, closets, and basements to find forgotten goods they can auction off on eBay. Heavily indebted mining operator Rio Tinto has been scouring the equivalent of its dusty attic for most of the year in a frantic search for assets to sell, so that it can pay off some of the $38 billion it borrowed to purchase Canadian aluminum producer Alcan two years ago.

Thus far, it's raised more than $7 billion, but it might be doing itself as much harm as good. After spurning the advances of Aluminum Corp. of China (aka Chinalco) in favor of a joint venture with BHP Billiton (NYSE: BHP), Rio completed a rights offering in July that raised $15 billion, which helped reduce its debt burden to around $24 billion. But it still has a $9 billion nut to crack this year, followed by a similar payment next year, and $10 billion more due in 2012.

Rio subsequently divested non-core Alcan businesses for $2 billion, sold some iron-ore mining operations for $750 million to Vale (Nasdaq: VALE) last week, and got almost $350 million for a composites business.  

Yet its mad dash for cash runs the risk of snagging less-than-optimal prices, while making the company look desperate. With the added pressure of lower commodity prices dramatically altering its profitability, maintaining Rio's lofty stock price becomes a challenge.

In Rio's favor, however, the world economy is improving, and China maintains an insatiable demand for steel. CAPS member H28 says that money supply and price inflation will offer Rio a modicum of support. Furthermore, despite being the world's biggest steel producer, China doesn't have enough iron ore of its own to meet demand, and must import whatever it can't produce.

In negotiations with Rio, Vale, and BHP on what price to pay for the ore, China has reluctantly agreed to a 33% price reduction, instead of the 50% cut it wanted. Word from trade talks now says that China has essentially given up hope for extracting any bigger reductions for the time being, and is looking further out instead. That's good news for Rio, since earnings won't be affected to the same extent they might otherwise have been.

CAPS member roadwarrior777 says a recalcitrant China has effectively cut off its nose to spite its face:

With China's refusal to sign a deal in 2008 now they're paying 50% more for the iron ore since they are trying to pressure BHP with arresting some of the top execs and with spying. Now China is paying 110/Metic ton instead of 50 some. They're hurting themselves but have not yet backed down and released the execs. So for the future I believe you will see Vale, BHP, and RTP will go up in value

Gather 'round
With so many good opinions about today's top companies, why not grab a pointy paper cup and join us at the Motley Fool CAPS watercooler? Your input can help guide other investors to stocks with bright prospects for growth. 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.

Sign up today for the completely free service, and let us hear what you have to say about the great and almost-great companies that interest you.