5 All-Star Stocks on Fire

When the clock's ticking down and the game's on the line, which of your teammates do you trust to sink the winning shot? Sure, you could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? So instead, you pass to the guy with the hot hand, the one who'll be deemed en fuego tomorrow on ESPN.

Momentum investors are looking for stocks in a similar state of sizzle. But momentum by itself will only get you so far. I prefer to find high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to your team's superstars when they do have a hot hand.

There's no doubt that now is a tough time to try and find winners out there, but to find the current league leaders, I ran a simple momentum screen on The Motley Fool's CAPS screener. The performance of each of the stocks below managed to surpass the S&P 500's 8% gain over the past month and has been rated highly by CAPS players.

Sources: Yahoo! Finance, Capital IQ, and CAPS as of April 20.

At first glance this sure looks like a high-quality group. But as always, I highly advise taking a close look before you throw a bounce pass in the direction of any of these stocks. In fact, I'll even kick off your research with a look at Motley Fool Rule Breakers recommendation Intuitive Surgical.

Providing the pep
Many investors have looked toward health-care companies like Johnson & Johnson (NYSE:JNJ) and Pfizer (NYSE:PFE) to play bodyguard for their portfolios over the past year. To date, they've kept up their end up the bargain: While both are down for the past 12 months, they're down less than the rest of the market.

Highflier Intuitive Surgical, which sells robotic surgical systems, hasn't held up nearly as well though. As the S&P 500 index slid 40%, Intuitive lost more than 56%. But now that a faint glimmer of hope is flickering in the market, Intuitive's stock has come charging back.

Last week, the stock got an extra boost after the company announced first-quarter earnings. The report was a mixed bag, with system sales falling from last year but sales of both accessories and services climbing. Overall, earnings per share collapsed by 43%, but surgically enhanced adjusted earnings -- which included some deferred revenue for customer upgrades -- came to a less cringe-inducing 20% drop. While it may not sound all that hot, the adjusted earnings number was in line with what analysts had been expecting, and meeting expectations counts for a lot these days.

Looking ahead
The breakdown of Intuitive's quarterly performance gives us a pretty good view into how the business is trending. On the one hand, system sales are slowing down. This is something we might expect during a recession, as hospitals cut back their capital spending budgets. 

However, the growth in accessories and services shows that Intuitive's customers are not only making good use of their installed systems, but they're coming back to the company for add-on products and services. Shareholders should particularly like this last bit, because it's these two line items that will build a stream of recurring revenue. (Follow this link for a closer look at Intuitive Surgical's business model.)

Intuitive Surgical's stock isn't at the coveted five-star status on CAPS yet, but its four stars show that the community has strong confidence that it will outperform the rest of the market. Earlier in the month, CAPS All-Star Caligiuri became one of the 3,626 Intuitive Surgical bulls on CAPS, saying:

Cash flow statement and balance sheet look phenomenal. Great product that will enable … company increase book value. No debt. Solid leadership team.

Sure, the price isn't exactly cheap right now, but when you have a company as impressive as intuitive surgical you are going to have to pay up for it. Estimated 5 year growth rate is over 20% which raises the stock price, but for good reason.

When the economy turns around everyone will want to be in this company and it will probably get way overpriced, just like it did before.

And that pretty much covers everything that I haven't thus far. Most notably, the company has an impressive $822 million pile of cash on its balance sheet with no debt to speak of -- talk about a cushion for tough times. As Caligiuri points out, the stock's forward price-to-earnings ratio of 27 isn't cheap in any sense of the word, but hey, if you're looking for high growth and the next big thing -- which Intuitive Surgical could be -- sometimes you have to accept a richer price.

Fielding your team
So, do you think any (or all!) of these companies deserve a place on your All-Star team? You can share your thoughts or check out more of what your fellow Fools had to say by stopping by CAPS. And while you're there feel free to take a peek at a few more of the 5,300-plus other stocks that are rated on CAPS.

I think I heard a booyah somewhere out there -- thanks Stuart Scott!

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