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 although many stocks will indeed plunge back to Earth, some seem immune to gravity and continue to steadily ride 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 Highs" lists published on MSN Money on Thursday/Friday. CAPS ratings from Motley Fool CAPS.

Everybody loves a winner
Well, maybe not everybody. In fact, of the five stocks hitting five-year highs on today's list, only two enjoy above-average ratings from CAPS members.

Between the two, Omega Health care enjoys slightly greater popularity among Foolish investors, but I find this REIT's lack of free cash flow a little worrisome. For that reason, I'm going to put Omega on hold today and instead focus our attention on the runner-up, Mexican fixed-line phone giant Telefonos de Mexico.

The bull case for Telefonos de Mexico
DaveMartinez introduced us to this company early last year: "Telmex has a near-monopoly status in Mexico and has hedged themselves against possible Mexican instability through their foreign investments. Even if a crisis were to befall Mexico its near monopoly status would give them lots of leeway to manipulate prices to their advantage (or buy goodwill by keeping them low)."

In the summer of 2007, wealthyvictor chimed in:

TELMEX is owned by the wealthiest person on earth, Carlos Slim. This company has a monopoly for 7 more years since he is a personal friend of Mexico's president Felipe Calderon. So I know it has way more to grow and keep its profits going. For atleast 7 more years or more.

"Carlos who," you ask? Looking up from a copy of Forbes last March, 1337n00b elucidated, quoting the magazine: "Latin America's richest man added more than $6 billion to his fortune this year. He sold off his stakes in MCI and Altria (NYSE:MO) and used the proceeds to up his holding in Saks; in his fixed line operator, Telmex; and in America Movil (NYSE:AMX), his flagship wireless telecom outfit."

From a valuation perspective, TelMex sells for a price-to-earnings ratio almost half that of Verizon (NYSE:VZ), and fully one-third cheaper than AT&T (NYSE:T). But does that make the stock a buy?

Not in my opinion.
Why not? Because from where I sit, TelMex doesn't deserve a valuation as rich as AT&T or Verizon. For one thing, TelMex isn't expected to grow as quickly as either of its peers north of the Rio Grande. For another, TelMex pays a dividend that's positively stingy by telecom standards -- a mere 2.7%.

No, Fools. If you're looking to buy yourself a fat slice of Mexican telecom growth, I suggest you look more closely at that other "Slim" holding -- America Movil. True, at first glance, that one sells for a P/E much more in line with its gringo brethren and offers a de minimis 1% dividend. But America Movil boasts a projected growth rate nearly three times as fast as what AT&T and Verizon manage on a good day, and four times TelMex's growth expectations. To me, the trade-off in growth is worth the slightly higher valuation on America Movil.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about TelMex. We really want to hear your thoughts. Head on over to Motley Fool CAPS, and tell us what you think.

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