How many times have you heard a sensational stock recommendation, only to be left in the dust? 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 these are not formal buy recommendations, I did come across these four-week bloomers, among others:
|
Company |
4-Week Return |
Recent Share Price |
Forward EPS Estimates |
CAPS Rating
|
|---|---|---|---|---|
|
Agnico-Eagle Mines |
25% |
$47.09 |
$0.66 |
**** |
|
Cemex |
27% |
$8.80 |
$1.19 |
***** |
|
Diana Shipping |
37% |
$12.11 |
$1.78 |
**** |
|
Navios Maritime |
87% |
$3.25 |
$0.92 |
***** |
|
Quality Systems |
47% |
$44.31 |
$2.07 |
***** |
|
Silver Wheaton |
64% |
$5.64 |
$0.23 |
***** |
|
Tesoro |
30% |
$11.91 |
$1.35 |
**** |
Data from Motley Fool CAPS and Yahoo! Finance, as of Dec. 25.
Click here to rerun the screen I used to find these stocks.
Recession? What recession?
Quality Systems is one of just a few stocks that has actually managed to eke out a gain in 2008, currently to the tune of around 45%. What's fueling the surge? It's situated in a blooming industry (health care) and a leader in a budding segment (electronic medical records). That's a rare combination that serves as one of the very, very few bright spots in a glum economy.
Even better, the prosperous days this company has seen don't appear to be anywhere near over: President-elect Obama's eagerly anticipated stimulus package includes a chunk of money for updating medical technology, which could be a boon for companies like Quality Systems.
As Obama stated earlier this month, "We will make sure that every doctor's office and hospital in this country is using cutting edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year." Ah, the sweet, sweet sound of modernization.
What makes a surge in business so lucrative for a company like Quality is that it's in one of the rare "high-switching-cost" industries where once customers are in, they're likely in for good. Once a medical office digitizes its records, there's little incentive and a huge cost to switch to rival products. It's the same type of advantage that gave power to runaway successes like Microsoft.
Another huge benefit (count 'em, we're up to four) is this company's fortress-like balance sheet. As CAPS All-star Har1en wrote earlier this month:
Another great company with a niche -- medium to large medical practice sales and upkeep of medical records tech. And another No Debt team member! Why do I like companies with no debt? Come inflation or deflation, these companies will be able to reprice their products to fit the new landscape and won't be slowed down by debt servicing. It also shows that the company not only has cash, but uses it to reinvest in the business or pay shareholders (in this case, to pay handsome dividends).
You get the picture: Quality Systems is a pretty sweet company. The question is whether the run-up has priced in all the good news, crowding out hopes for more big-league returns. Analysts expect the company to earn $2.07 per share in the year ending March 2010, which essentially equates to a forward P/E ratio of 21-22. That might seem a bit lofty, especially in this economy, but this company is no stranger to gangbuster-style growth -- five-year growth projections are still more than 18% per annum.
Balance out what could be a nice boost from the incoming administration within the confines of high investor expectations, and Quality Systems likely still has some legs left in its rally, although you probably shouldn't get your hopes up for another 45% gain in the year ahead.
You can see what more than 125,000 other investors are saying about these and thousands of other companies over at Motley Fool CAPS. Care to share your thoughts, too? I thought so. Click here to come on over.
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