High Expectations, Even Higher Returns

• Email
• Share
• Print

How many times have you heard a sensational stock recommendation, only to find you're too late to enjoy its spectacular gains? 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."

To hunt down a few top-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 weeks. Data we've compiled shows that CAPS' top-rated stocks easily outperform the market.

While not necessarily formal buy recommendations, the screen I ran did turn up these four-week bloomers, among others:

Company	4-Week Price Change	Recent Share Price	2009 EPS Estimates	CAPS Rating (5 stars max.)
Agnico-Eagle Mines (NYSE: AEM)	77.5%	$50.95	$0.66	****
Chesapeake Energy (NYSE: CHK)	52.6%	$17.27	$2.71	*****
Vale (NYSE: RIO)	34.3%	$13.19	$1.95	*****
Freeport McMoRan (NYSE: FCX)	59.2%	$26.74	$0.77	*****
Potash (NYSE: POT)	44.9%	$77.35	$12.90	****
Suntech Power (NYSE: STP)	51.8%	$12.90	$0.84	****
Mosaic (NYSE: MOS)	33.7%	$36.86	$7.31	****

Data from Motley Fool CAPS and Yahoo! Finance, as of Jan. 4. Four-week price change from Dec. 5 to Jan. 2.

Commodities strike back
After a brutal 2008 -- particularly the last few months -- commodities are enjoying a well-deserved rebound. The question now is whether the surge is just a dead-cat bounce, or a more sustainable move back to reality. Thankfully, our CAPS community tends to think it's the latter.

Take Chesapeake Energy. Shares were nearly left for dead late last year, after energy prices capitulated, and hedge funds (and even the company's own CEO!) were forced to unload mountains of stock against their will. CEO Audrey McClendon had to dump more than half a billion dollars worth of shares to meet margin calls. As Fellow Fool Toby Shute put it, "The volume of his selling without question triggered something of a vicious cycle." Ah, the sweet smell of opportunity.

CAPS member goldseth thinks the sell-off that ravaged Chesapeake last year was far from justified, and believes that the current energy ballyhoo will eventually stabilize:

This sell-off is an over-reaction (hedge fund redemption may be a key here) which creates great opportunity for those willing to take the dive! First of all, consider natural gas prices. Short term, the natural gas phenomenon created an industry of drill, drill, drill and resulting oversupply coinciding with an economic slowdown, industrial demand destruction in particular, has destroyed prices. However, the credit crunch, slowing economy and low prices should weed out many small players and unconventional rigs, bringing more balance to supply. Long-term, the charts seem to show support in the $6 range and natural gas demand should be strong as clean energy and domestic energy remain key political talking points.

Toby Shute went one step further, suggesting that Chesapeake might even end up a multibagger from its 2008 lows. "I think we can easily dismiss the rumors of Chesapeake's pending demise. A multibagger, 'mother of all recoveries' -- to borrow McClendon's phrase -- is far more likely." he said. Panic, meet opportunity.

All that glitters ...
One of the biggest movers of the past month has been Agnico-Eagle Mines, a company my colleague Christopher Barker tagged as the best stock for 2009.

The theory behind gold stocks is pretty simple these days: Ben Bernanke's printing money at a frantic pace. Once the economy picks up steam, that money will presumably ignite runaway inflation, causing investors to flock to hard assets like gold. As CAPS member tradererik wrote of Agnico-Eagle last month, "Government is printing money to cope with bad paper etc. Inflation will be here in spades. This is one of the best gold companies."

Sounds easy enough. My biggest question is how long our current deflationary spiral will last before it reverses course -- the catalyst needed to vindicate gold stocks. Exactly when it'll happen is anyone's guess, but it's likely to happen at some point. Patience may be a virtue for goldbugs going forward. It all depends on Ben Bernanke's ability to pull out excess liquidity out of the financial system before money velocity picks back up, which is much, much easier said than done.

The hunt continues
The carnage of 2008 has irrefutably produced some tremendous bargains as we enter 2009. Over at CAPS, over 125,000 other investors are rating and ranting about these and thousands of other stocks. Care to share your thoughts and see what everyone else is saying? Click here to give it a try. It won't cost you a dime.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro, and to receive a private invitation to join, simply enter your email address in the box below.