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 four- or five-star stocks that have been shootin' for the moon in recent months.

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

Data from Motley Fool CAPS and Yahoo! Finance as of Aug. 24.

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

A closer look at US Bancorp
I still firmly believe that individual investors should avoid most of the financial sector. But, admittedly, this stems from what individual investors don't, and cannot, know -- not what we already know that might look ugly. To paraphrase Donald Rumsfeld, we're swimming in a world of "known unknowns." There is value in the banking sector, but finding it and realizing its potential is something that, I believe, is often only clear in hindsight.

But if investors insist on digging into the financial sector, they could do worse than focus on the highest-quality banks. US Bancorp is one such bank. Two simple factors make this so:

• While not completely immune, it avoided most of the seriously stupid lending practices that have plagued other banks.
• It has a very low cost of capital deposit base. It's cheaper, and more profitable, than many of its peers.

The low cost of capital is important when it comes to earnings power. Warren Buffett has always said the low cost of capital is what drives him to love Wells Fargo (NYSE:WFC). We can assume that's the same reason he's a major investor in US Bancorp, as well.

You can see the effect of this low cost of capital by looking at net interest margins:

Frankly, Wells Fargo is in a league of its own. But US Bancorp is indeed a notch above most of its other peers. And don't scoff at these seemingly minute differences: A few basis points lead in net interest margin translates into a lot of money when you're talking about balance sheets in the hundreds of billions of dollars.

Add it up, and our CAPS community is downright bullish on this bank. As CAPS member thawkeye2 writes:

Throwing the baby out with the bath water could describe what happened to [US Bancorp]. They are a well managed organization that has not gone down the same high risk path as many of the other banks, however they were painted with the same broad brush as all the others.

Of the more than 2,000 CAPS members rating US Bancorp, some 93% expect it to outperform the broader indices. For a bank, that's about as good as it gets these days.

Your turn to chime in
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