5 Stocks Guiding Higher

Stock analysts are just about as likely to be right with their forecasts as economists, meteorologists, and fortune tellers. Weathercasters might not be right any more often than the others are, but at least they have a scientific basis for their predictions. Everyone else is about as accurate as monkeys throwing darts or flipping a coin.

Before the advent of Regulation FD, analysts were far more optimistic in their opinions. Today, they tend to think companies will underperform more than they do. State Street Global Advisors says that's because companies are "more explicit" in their guidance, in hopes of minimizing share-price volatility.

A guide to the future
If that's the case, then let's use the information companies provide to our advantage. When they announce earnings, they also often update guidance for the coming quarter and year. These reports aren't 100% accurate, but we can reasonably expect that a company's own estimates would be better than most others at predicting what the future will bring.

With the help of the Motley Fool CAPS investor-intelligence database, we can tap the collective thinking of more than 105,000 professional and novice investors on which stocks they think are best. We'll look at those companies that have guided higher and pair that information with stocks that CAPS believes have the best chance to outperform the market.

Here are five companies that have recently guided higher, coupled with what CAPS investors think:

Company

Period

Analyst Estimate/Previous EPS Guidance

Updated EPS Guidance

CAPS Rating (5 Max)

Arctic Cat (Nasdaq: ACAT  )

FY 09

$0.12

$0.18-$0.28

*

BMC Software (NYSE: BMC  )

FY 09

$2.09

$2.10-$2.20

***

Fuqi International (Nasdaq: FUQI  )

Q2 08

$0.19

$0.20-$0.21

****

Intuit (Nasdaq: INTU  )

FY 08

$1.59

$1.61-$1.63

****

J.C. Penney (NYSE: JCP  )

Q2 08

$0.37

$0.38

**

Sources: Briefing.com, Motley Fool CAPS.

These are companies showing signs of growing their business, and analysts and the CAPS community alike follow them. But this isn't a list of stocks to buy; instead, it's a list of suggestions for further research. In that vein, let's take a closer look at one of them.

An opportunity with bling
There's still a long way to go before a true market economy ever fully takes root in China, but the nascent growth of the middle class there has allowed its people to experience some of the materialistic excesses we so enjoy here.

According to the prospectus of Chinese jewelry maker Fuqi International, the market researchers at Global Industry Analysts estimate that China's jewelry industry grew to $14 billion in 2005 and expect it to lead global jewelry processing and consumption by 2010. That has a number of investors anticipating future growth for Fuqi and other companies that can tap that swelling demographic. CAPS player rabidtigerfan, for one thinks the company is "well positioned to profit from China's expanding middle class." Our player continues: "I am looking for companies that [will] sell to China's middle class. This company qualifies [and] seems better positioned than [its] rivals."

Similarly, BetterBizBooks looks to those with newfound wealth from market forces growing over an exceedingly long time span.

Chinese jewelry ... going from wholesale to retail and fast expanding. more [Chinese] middle income = more sales. Pure demographic play on the next 5 [to] 10 years. ... Taking EPS guidance up, strong sales growth, etc.

The company admits that the competition is already well established in China and may have snatched up some of the most desirable locations for retail stores, but it still believes the market is large enough -- and growing enough -- to support its own operations profitably.

Guide on!
Yet we want to know your opinion on Fuqi. Your input can help guide other investors to stocks with bright prospects for growth. Head on over to Motley Fool CAPS, and let your voice lead the way.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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