Top-Rated Stocks Blowing the Doors Off This Market

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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 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 months.

While they're 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)
Cemex (NYSE: CX)	57.4%	$8.09	$0.84	*****
GigaMedia (Nasdaq: GIGM)	38.2%	$7.38	$0.77	*****
Graftech International (NYSE: GTI)	93.3%	$9.26	$2.11	*****
McDermott International (NYSE: MDR)	67.4%	$13.06	$1.66	*****
UnitedHealth Group (NYSE: UNH)	44.7%	$28.96	$3.00	*****

Data from Motley Fool CAPS and Yahoo! Finance, as of Feb. 14.

You can rerun the CAPS screen I used by clicking here.

Managed-care giant UnitedHealth had an abysmal 2008, losing more than half its value and substantially underperforming the broader indices. The hemorrhaging was hardly unique -- competitors Aetna (NYSE: AET) and WellPoint (NYSE: WLP) suffered similar declines, as a cost-conscious economy did a double-take at exploding health care costs. Throw in panic of reform under the new Obama administration, and the fear of toxic financial assets plaguing health insurers' balance sheets, and investors fled these stocks in droves.

While the fears were legitimate, it's becoming increasingly clear that (a) they were overblown, and (b) the industry is staring to turn a corner. Allow me to explain.

Complete and utter overreaction
UnitedHealth shares have doubled since hitting multiyear lows in November. At the time, shares traded at around $17 a share -- a ridiculous valuation that implied not much more than five times forward earnings.  

While earnings prospects have certainly come down amid rising unemployment, long-term expectations hardly indicate anything apocalyptic. In fact, analyst expectations over the next four years are actually pretty promising. Take a look:

Year	2009	2010	2011	2012
EPS estimate	$3.01	$3.29	$3.57	$4.26

Source: Capital IQ, a division of Standard & Poor's.

So while the biggest returns might behind this stock, shares still trade at less than 10 times forward earnings with the expectation of solid growth in the coming years. That's a rare combination, hinting that the recent rally still has some legs.

Turning a corner
While private health insurance policies wane in a recessionary environment, Medicare and Medicaid have been a boon. The number of Medicaid individuals served by UnitedHealth, for example, surged 47% in 2008 -- most of it being organic growth. Medicare patients jumped 9% in the year. CAPS member MyGirl57 pointed at this prospect back in October, writing, "Baby Boomers are going to be needing [UnitedHealth] in the next 5 years or so. It is one of the best Medicare Supplements, and is endorsed by the AARP."

As the economy weakens, and baby boomers age into their golden years, both Medicare and Medicaid offer substantial opportunities for UnitedHealth, picking up the slack as private health plans begin to recede. I enjoyed the bluntness of CAPS member olavisjo, writing last fall, "Aging population, you do the math."

I'll do some simple math: At $29 a share, UnitedHealth is one of the best managed-care companies in the world, trading at less than 10 times forward earnings. In the years ahead, it should be able to profit from an aging population and its ability to raise premiums as health care costs rise. In an economy this uncertain, I like those odds -- especially at today's prices.

Take it from here
Disagree? See it in another light? Just want to see what the rest of the pack is saying? More than 125,000 investors use CAPS to share ideas and swap opinions. Click here to check it out. It's 100% free to participate.

For further Foolishness:

• These Companies Will Get Better In a Recession
• This Is Why Buffett's Buying Stocks