5 Stocks That Just Won't Quit

In my weekly Fool column "Get Ready for the Fall," I run Nasdaq.com's 52-week highs list through the "wisdom of crowds" meter we call Motley Fool CAPS. The result: a list of stocks that have flown so high, investors are starting to get nervous about that whole "gravity" thing. But while many stocks will indeed plunge back to Earth, some seem immune to gravity, steadily riding a rising megatrend to ever-greater heights.

Today, we'll move beyond stocks that have hit 52-week highs, and identify companies now surpassing five solid years of outperformance. Which of these will thrash the market averages for another half-decade? Here are this week's leading contenders:

Companies are selected from the "New 5-Year Lows" list published on MSN Money on Thursday. CAPS ratings from Motley Fool CAPS.

"Everybody loves a winner"
Not necessarily. As this week's list of stocks hitting 5-year highs demonstrates, being a "winner" often enough earns only a shrug from investors, or even a snort of disbelief. CAPS members get a particularly strong case of altitude sickness when looking at Thoratec, a stock that approximately one investor in four expects to underperform the market going forward, despite its success.

And the one stock they do think will go from great things to greater things? Turns out that stock -- Motley Fool Rule Breakers recommendation AeroVironment -- has been public less than two years. (Although technically, I guess MSN is still right in saying this is the highest price the stock has fetched in five years.)

Maybe AeroVironment slipped onto the list by virtue of a technicality, but CAPS members seem convinced that it deserves its place here, as several of our highest-ranked investors have recently begun voting their support of the stock. Let's find out why, as we dive right into...

The bull case for AeroVironment

Citing AeroVironment's two biggest revenue producers, CAPS All-Star BSHumphreyII writes:

[Unmanned aerial vehicles] and electric cars? Gotta like that! UAVs are one defense market that probably won't suffer even if the new administration does cut defense spending. Great growth, and the technicals look like the stock is getting ready to break out from its recent price consolidation.

And why might UAVs be immune from defense spending cuts? Fellow All-Star Joker1001 explains that "with cuts in defense spending likely, drones offer a cheaper alternative to full sized aircraft."  This sentiment is echoed by Gonzhouse:

Obama's win will put the defense funding emphasis on smaller, more practical weapon systems that save soldier's lives ... [AeroVironment] and [iRobot (NASDAQ:IRBT)] both will be in the sweet spot for funding. This will be magnified by a shift of resources out of Iraq and into Afghanistan. What is needed to win is not a new jet fighter but a way to engage militants on the ground by US forces at a safe distance. Again, [AeroVironment] and [iRobot] have a virtual lock on providing surveillance and punch at a safe distance.

Much of the above is correct -- with a few clarifications. For one thing, iRobot has a doppelganger in the form of Britain's QinetiQ, which has put more of its Talon military robots in the field than has iRobot and its PackBots. And AeroVironment, while it's undeniably the leader in small unmanned aerial vehicles, faces a raft of competition from makers of larger UAVs such as Northrop Grumman (NYSE:NOC), Textron (NYSE:TXT), Lockheed Martin (NYSE:LMT), and Boeing (NYSE:BA).

Still, the basic premise seems sound to me -- as I've written more than once. UAVs are part of a long-term trend in the military toward developing products that minimize friendly casualties. Taking this thesis as a starting point, and proceeding to review AeroVironment's record of consistently beating Wall Street expectations, I see a lot of growth in the company's future (and indeed, I own some of the stock myself).

Time to chime in
Of course, with its trailing P/E now standing at a lofty 32, these growth prospects seem pretty well priced into the stock. Skeptics, such as fellow Fool TMFRedwood, argue they're actually more than priced in, and that AeroVironment must grow at 20% per year for the next decade in order to justify today's valuation.

Granted, analysts are predicting something near that -- 19% consensus growth -- for each of the next five years. But that still leaves five years unaccounted for, and these same analysts have proven themselves consistently wrong in their past projections. Every single time they've set up an earnings estimate for AeroVironment, the company blew right past it.

So rather than listen to the "experts" this time, we'd like to hear what you have to say about AeroVironment. Don't be shy. Click on through, and tell us what you think about its chances.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro, and to receive a private invitation to join, simply enter your email address in the box below.