Top-Rated Stocks Blowing the Doors Off This Market

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.

To hunt down top-recommended stocks that have been rewarding investors accordingly, I summoned our Motley Fool CAPS community to point out a few recent four- or five-star stocks that have been shootin' for the moon.

While not formal buy recommendations, these three-month bloomers caught my attention:

Data from Motley Fool CAPS, and Yahoo! Finance as of June 4.

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

Terrible industry, great company
That about sums up how you should feel about luxury goods manufacturer Coach. As the economy shifts into hyper-frugal mode, companies that rely on selling disturbingly expensive goods that no one needs can be an accident waiting to happen.

But this might be one of the few companies not only able to stick it out, but still crank out some respectable numbers. Through a combination of a cult-like following, growth potential in new markets, and superior management, Coach might actually make a compelling investment. Here's how CAPS All-Star MattH42004 summed it up in April:

• Excellent balance sheet. [Coach] has no real debt and net cash of over 400m.
• High profitability. [Coach] has consistently maintained profit margins in the 20-25% range.
• Great management. The CEO is the best in the retail business (see above) and owns 5% of the stock. 
• Solid growth potential. [Coach] is in the process of a very profitable Asian expansion. The possibility of introducing lower cost goods could expand the costumer base as well. Also, the massive failures of their competition (think [Macy's (NYSE:M)]/[Nordstrom (NYSE:JWN)] will only help to increase market share. Their loss is [Coach's] gain.

All great points. The downside risks here are 1) the potential of shares already being fully valued, and 2) further contractions in consumer spending and sentiment.

Valuation wise, shares trade at roughly 15 times forward earnings. That relatively chipper valuation is of course a product of this company's huge run over the past few weeks. And while I wouldn't call shares necessarily expensive at these levels, you have to think the biggest moves are behind us. Hoping for further multiple expansion from here seems quite dicey.

Furthermore, as I showed last week, consumer confidence is indeed making a rebound, but it's still extremely low by historical standards. If the recent stock market rally turns out to be a head fake, consumer confidence -- a key metric to determine the future of this industry -- could nose-dive again quickly.

Your turn to chime in
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