The Best Stocks Right Now

It's been 14 months since we began tracking "The Best Stocks Right Now" in Motley Fool CAPS, the Fool's free online investing community. Amazingly, our CAPS community has quadrupled since last January, now comprising more than 86,000 investors.

Back to the present
It's been a rough-and-tumble year for the market, to say the least. The subprime crisis continues to wreak havoc on mortgage-related companies like Freddie Mac and, most recently, Bear Stearns.

Things may appear bleak, but as Mr. Cramer says, there's always a bull market somewhere. In unsure markets like this, however, the bulls can be more difficult to find. That's where CAPS can help. CAPS players rate stocks to either outperform or underperform the market going forward, and the players themselves get rated based on their performance.

Here's this month's list of the top-rated five-star stocks on CAPS.

Please bear in mind that these are not formal recommendations. Instead, I offer this list as a jumping-off point for further research. In fact, researching five-star CAPS stocks such as these has proved to be an effective tool for investors.

A spot of Texas Tea, sir?
With crude oil currently sitting around $110 a barrel, it should come as no surprise that investors are bullish on oil stocks -- four of our top 10 investments this month are in the profession of Jed Clampett. But the oil stocks our CAPS investors have chosen aren't your typical multinational conglomerates like Exxon Mobil (NYSE: XOM) or ConocoPhillips (NYSE: COP); they focus instead on oil services.

This month's top stock, W-H Energy Services, for example, is involved in the drilling and completion of oil and natural gas wells. W-H Energy competes intensely with some big boys like Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL) in this arena. But whereas the former two companies generate the majority of their revenue from overseas, W-H remains dedicated to the North American fields.

While some may regard this as short-sighted and constrictive, W-H might be onto something. According to the company's most recent 10-K, "We believe that the longer-term domestic outlook will continue to reflect upward pressure on oil and natural gas prices as supply struggles to keep up with demand...Our response to this expectation is to expand our geographic coverage in North America," particularly in the Rocky Mountain region.

In other words, instead of journeying overseas to take on larger competitors, W-H seems confident that it can capitalize on its niche in North America.

Financially, W-H Energy shows a strong balance sheet with a manageable level of debt. The majority of its cash flows are reinvested in business growth, and the company is not free cash flow-positive, so don't expect a dividend anytime soon. Return on equity has also increased over the past few years, increasing to 25.4% last year from only 7.8% in 2004.

CAPS investors are rather taken with W-H Energy -- 203 of 205 investors who have rated it believe that it will outperform the S&P 500. General sentiment is that W-H Energy will have the opportunity to take advantage of rising oil and natural gas concerning prices and its positioning in North America. One such bull is otterup, who had this to say about W-H last April:

They will be able to capitalize on the growing need for natural gas and will be able to compete against much larger competitors such as SLB or HAL as these are focusing on international markets. This trend leaves the North American market open to smaller and more nimble players.

Learn what CAPS investors are saying about W-H Energy by heading to its CAPS page. If you'd like to voice your opinion about this stock -- or any stock, for that matter -- join the Motley Fool CAPS community now and make your voice heard.