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 their 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 look at each of these picks to kick you off with some thoughts.

PetroKing
Petroleo Brasileiro, better known as Petrobras, was Brazil's state-sanctioned monopoly for oil and gas until the late '90s. Though it no longer has its monopoly status, Petrobras is today not only the largest oil and gas company in Brazil, but the largest in all of Latin America.

The future looks good for Petrobras. Not only are we currently operating in a time of high oil prices, but Petrobras is serving one of the most dynamic young economies in the world. Over the past three years, the company has more than doubled revenue while consistently returning more than 25% on its shareholder equity.

CAPS All-Star Columbus86 picked Petrobras earlier this year and said, "[Petrobras is] one of the best international integrated oil companies. [It's] trading at an extremely low price to reserves ratio."

My heart will go on
Though the Titanic rage that flared when Leo and Kate hooked up on the silver screen has faded, Premier Exhibitions continues to capitalize on the world's ongoing interest in the famous shipwreck. Since 1994, the company has been the salvor-in-possession of the Titanic wreck and has exclusive rights to recover the remains from the Titanic site. The company has taken what it has recovered and set up an exhibition that tours the world, hitting everywhere from Oshkosh, Wis., and Lubbock, Texas, to Athens, Greece, and Seoul, South Korea.

Ccopeland, another CAPS All-Star, has given Premier Exhibitions the thumbs-up: "... [T]his stock has everything a great value stock needs: low P/E, high inside ownership, [a] strong corner on a niche market, nice profit margin, and [return on equity], etc., etc. And most important, no mention of the stock on Mad Money."

Spot on
I don't think I need to tell anyone what good, old Target does. By creating "affordable luxury" for its customers, the company has been more than holding its own against behemoth Wal-Mart (NYSE:WMT). Though everyone's favorite value investor, Warren Buffett, may have sold off Berkshire Hathaway's holdings of Target, CAPS players are still positive on the stock.

The king of CAPS himself, TMFEldrehad, has given the nod to Target and said, "... I think there will always be a certain segment of the population that wants something just slightly more 'upscale' than can often be found at Wal-Mart. This, combined with a greater selection than can usually be found at warehouse stores like Costco, should lead toward profitable growth for some time to come."

Not so heavy metal
For the three years ending in December 2006, Titanium Metals saw its revenue grow 376%. In 2003 the company was unprofitable, and it now sports a net income margin higher than 20%. Investors haven't missed this impressive performance, and the stock has increased 5,939% -- that's right, a fresh 60-bagger.

Though we're not likely to see the stock jump another multiple of 60, strong demand from its commercial and military aircraft customers is keeping Titanium busy and growing. Rising fuel prices and newer engine designs are driving demand for titanium, which is a metal that performs well at elevated temperatures and has a high strength-to-weight ratio.

choller184 has picked the stock on CAPS and reasons, "Global titanium needs are [in] tight supply and the needs are growing. A can't miss for this pure titanium play."

Don't El Paso over this one
Exciting is not a word to describe El Paso Electric, but then again, you don't need excitement to find a good investment. The company serves 350,000 customers in west Texas and southern New Mexico and gets the largest percentage of its power from nuclear plants. The company has performed well compared to its close comparables, and is expected to put up 10%-plus annual growth over the next five years.

Despite its solid business, only 17 CAPS-playin' Fools have rated El Paso so far, so there's a lot of room to share some insight and thoughts on the stock.

Now for the real question: Are you getting your own CAPS Stock of the Day selections yet? If not, what are you waiting for? CAPS is free, and getting your Stock of the Day picks is much more fun than having me track you down and give you a wedgie. And don't think I won't do it ...

More CAPS Foolishness:

• 5 Dynamic Dividend Stocks
• Catch the Blog Buzz.
• 7 Surprising 1-Star Stocks

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Netflix, Amazon, and Costco are Stock Advisor recommendations. Wal-Mart and Berkshire Hathaway are Inside Value selections. Matt tried to give The Fool's disclosure policy a wedgie, but was overpowered by its incredible might. Don't worry, he learned his lesson.