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.

I've called on our Motley Fool CAPS community to point out a few four- or five-star stocks that have rewarded investors like gangbusters in recent months. While they're not formal buy recommendations, these three-month bloomers caught my attention:


Price Change

Recent Share

2009 EPS

CAPS Rating  
(5 stars max.)

American Eagle Outfitters










Marvell Technology





Rio Tinto





Taseko Mines





Data from Motley Fool CAPS and Yahoo! Finance and Capital IQ, a division of Standard and Poor's, as of March 31.

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

Retail? Really?
I understand Fools' hesitation to invest in retail stocks. The American consumer, for all intents and purposes, died last fall. The personal savings rate is blowing up, which means people are steadily spending less money -- especially on discretionary items like apparel.

So why even blink an eye at a company such as American Eagle Outfitters? A few reasons:

  • It's oozing with cash and completely debt-free.
  • With shares down more than 30% in the past year, a lot of the bad news is already baked in.
  • While no one's calling a bottom, there are signs of stabilization among American consumers.

American Eagle scores most of its points by having one of the best balance sheets in the industry. With no debt and $2.35 per share in cash, this stock has a solid buffer, and abundant leverage over retailers like Sears Holdings (NASDAQ:SHLD) and Best Buy (NYSE:BBY). Whatever your industry, cash is king these days.

Better yet, there are cautiously optimistic signs that consumers are starting to emerge from the fetal position in which they've huddled since last fall's financial collapse. Consumer sentiment actually rose by a hair to 26 in March, topping 25.3 in February. Furthermore, consumer spending inched up in February for the second consecutive month. Make no mistake: Both readings were still terrible. We're talking about data that's not good, but simply less bad.

Still, for an extremely well-capitalized company like American Eagle, less-bad news might be all it takes to keep this rally going. Last year, CAPS member Midsouthtrader noted that this company's long-term strengths and future potential were being discounted alongside its wayward peers:

American Eagle is well-managed and is not damaged goods, i.e. the brand remains strong or stronger that its competitors. While in a challenging environment now, will survive and thrive as soon as the economy turns up, so today's prices heavily discount the current economic crisis.

While diving headfirst into retail stocks could very well equal financial suicide, a few companies will indeed hold strong, survive, and flourish when consumer sentiment rebounds. With a rock-solid brand name and a fortress-like balance sheet to back it up, there's no reason to think American Eagle won't be one of them.

Your turn to chime in
What do you think about American Eagle? Is retail dead for good? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

For further Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Best Buy and Sears Holdings are Motley Fool Inside Value recommendations. Best Buy is a Motley Fool Stock Advisor pick. The Fool owns shares of American Eagle Outfitters and Best Buy. The Motley Fool is investors writing for investors.