Stocks of the Week

The idea of supplying customers with recommendations based on prior shopping habits isn't all that new. If you've signed on for service with Blockbuster or Netflix, you know about the movie recommendations they hook you up with (mine right now include The Year of the Yao and About Schmidt -- does that say something about me?). Shoppers on Amazon.com get a similar slew of suggestions based on their previous purchases.

Investing in stocks may not be exactly comparable to renting a movie or buying a book on Amazon, but with thousands of stocks out there, finding new ideas can often be overwhelming. To help grease the ol' mental machinery, The Motley Fool's CAPS service recently started providing players with daily stock recommendations.

It works like this: CAPS members create a portfolio by rating some of their favorite (and least favorite) stocks. The super-secret stock-of-the-day algorithm, which I've heard has to be run on a Cray supercomputer and uses pi to the 104th decimal place, then starts churning out highly rated stocks for each player based largely on that player's prior selections.

To give you a sampling of the kinds of ideas that CAPS is doling out, here are the five recommendations the CAPS supercomputer spit out for me last week:

As smart as the CAPS stock-of-the-week algorithm may be, it's still just an algorithm, so be sure to look before you leap on any of its suggestions. With that in mind, I took a dive into Atlantic Tele-Network (ATN).

Land of many waters
When you think about countries in South America, Guyana isn't likely to be the first that pops into your head. The country is directly north of Brazil and to the east of Venezuela and has an estimated population of 751,000. Unfortunately, Guyana may be best known around the world as the site of the infamous Jonestown Massacre.

For years, though, Guyana has played a very important role in Atlantic Tele-Network's business. In 1991, the company acquired an 80% interest in GT&T, the exclusive provider of local and long-distance wireline telecom services in Guyana. The company is also the country's largest provider of wireless telecom services, though in that market it does have competition.

Fans of Warren Buffett are likely to remember his famous fancy for "toll roads" -- a liking that got him into some hot water when he bought The Buffalo News. While GT&T does face government regulation on what it charges, it is the only game in town when it comes to making wireline calls into and out of Guyana. ATN estimates that there are currently more than 1 million Guyanese living in the U.S., Canada, and the U.K., creating a significant long-distance market.

Over the past couple of years, ATN has picked up the tempo and has been making growth-oriented acquisitions. In 2005, the company paid $59.3 million for 95% of Commnet Wireless, a provider of wholesale roaming services in rural areas of the U.S., and subsequently bought out the remaining 5% early this year. In 2006, the company paid $13.2 million to snap up 96% of Sovernet, a provider of voice, high-speed Internet, and dial-up Internet services primarily in Vermont.

The acquisitions have provided some very noticeable growth -- revenue was up 7% in 2004, 15% in 2005, and then 52% in 2006. The company so far appears to be maintaining its margins and returns on equity and capital. With a relatively stable underlying business, ATN has a good base from which to fund growth. The key will be for the company to continue to make smart acquisitions that will provide good returns.

On CAPS, the stock has an outstanding 98.6% bull-to-bear ratio, including a perfect 27-0 record with CAPS All-Stars. CAPS All-Star chk999 has given the stock a thumbs-up and thinks that investors can "add this one to the slow but steady grower pile." BaaMan adds:

[ATN] doesn't move fast, but is [a] consistent grower year over year ... and it pays [a] good [dividend] to boot. Barring radical political changes, this virtual monopoly will keep going for awhile longer.

So what's your holdup? Get on CAPS if you aren't already and get your own stock of the day. And while you're there, you can head over to ATN's page and share your thoughts on what may be ahead for this telecom toll road.

More CAPS Foolishness:

• This Just In: Upgrades and Downgrades
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• 5 Dynamic Dividend Stocks

Fool contributor Matt Koppenheffer likes toll roads too, expect when he is paying for them (especially that pesky one on the Golden Gate Bridge). He does not own shares of any of the companies mentioned. Amazon and Netflix are Motley Fool Stock Advisor picks. In the '80s, The Fool's disclosure policy let Quiet Riot's metal health drive it mad. It has since cleaned up its act and now listens mostly to Yanni.