No one has perfect foresight, but let's be honest: The market is full of people who, as Oscar Wilde would say, know "the price of everything and the value of nothing." Far too often -- over the past year especially -- investors have been pitched sensational stock recommendations, only to be left high and dry as shares crumble.
To hunt down much-recommended stocks that have been rewarding investors accordingly, I summoned our Motley Fool CAPS community to point out a few four- or five-star stocks that have gone gangbusters in recent months.
While not formal buy recommendations, these three-month bloomers caught my attention:
|
Company
|
13-Week Price Change
|
Recent Share Price
|
2009 EPS Estimates
|
CAPS Rating
(5 max)
|
|
Aluminum Corporation of China (NYSE: ACH )
|
66.9%
|
$19.01
|
$0.91
|
*****
|
|
Vale (NYSE: RIO )
|
24.2%
|
$14.92
|
$1.12
|
*****
|
|
Fuel Tech (Nasdaq: FTEK )
|
40.4%
|
$11.96
|
$0.20
|
****
|
|
Middleby (Nasdaq: MIDD )
|
63.7%
|
$38.06
|
$3.23
|
*****
|
|
Portfolio Recovery Associates (Nasdaq: PRAA )
|
30.7%
|
$36.33
|
$3.13
|
*****
|
Data from Motley Fool CAPS and Yahoo! Finance. Price change from Jan. 16 to April 17, 2009.
You can rerun the CAPS screen I used by clicking here.
Crossing our fingers for more credit market hell
Portfolio Recovery buys all of the junk banks have given up on, with the intention of recovering assets for a few pennies more than it paid for them. Kinda like Warren Buffett meets repo man.
It's extremely good at what it does, and the tsunami hitting consumers is creating an abundance of opportunities to purchase debt on the cheap. Look no further than the recent performance of credit card segments at Bank of America (NYSE: BAC ) and Citigroup (NYSE: C ) . It's tough in credit markets, and that's music to this company's ears.
CAPS member djveed recently hinted at the profit opportunities Portfolio Recovery might find picking through this depressed market, writing:
The consumer debt that [Portfolio Recovery] purchases will boon significant profits for them. However in my opinion, they won't be cashing in for many years as the consumers won't get hit as hard as everyone is forecasting on a long-term basis. Good hold for a year -- not beyond that.
While the idea of profiting from buying cheap consumer debt seems spot on, I have to challenge the timing of when investors might realize its full effects.
Think about what Portfolio Recovery is doing: It's following the polar opposite path of the forces that upended the banking industry. Banks acquired assets at full price and are trying to collect money from a consumer who's watching assets and job prospects incinerate. Portfolio Recovery, on the other hand, is acquiring assets for next to nothing and will attempt to recover from a consumer who -- in due time -- will be in a more stable employment environment and supported by asset markets (like stocks and real estate) on firmer footing. Consequently, I'm more inclined to think the big profits this company will see won't come right away, but later down the road when depressed assets can really be exploited. Buy low, sell high. That's what this is all about, right?
Now, the deep-value story here is quickly evaporating. Shares have nearly doubled since early March, after all. So is all the fun over for this stock? Most of it, yes. All of it, no. Shares still trade at 12 times earnings estimates for 2009 -- hardly a sign of jubilation or irrational expectations by any measure. Early next week, we'll be greeted with first-quarter earnings. I for one will be watching closely to see how this company -- one of the more fascinating financial stories out there -- is handling the worst consumer upheaval in generations.
Now it's time for your take
Loads of opportunities are being created in this market, not the least of which are niche players like Portfolio Recovery. What's your take on this company? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.
For further Foolishness:
RSS Headlines
Fool UK