Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.
Motley Fool CAPS offers a variety of resources to aid Fools in finding tomorrow's leaders. Our 130,000-member community is full of investors helping each other beat the market.
We'll enlist CAPS to screen for real estate firms, then get the story behind some of its more highly rated stocks. CAPS' nifty screener will help us find stocks with:
- A market cap of at least $100 million.
- A three-year revenue growth rate of at least 15%.
- A price-to-earnings ratio of less than 25.
Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.
Opinions with the numbers
Below is a sample of stocks our screen returned. You can run this screen yourself -- remember, though, that your results may differ as the market changes.
|
Company |
Revenue Growth Rate, Past 3 Years |
CAPS Rating (out of 5) |
|---|---|---|
|
E-House |
63.7% |
**** |
|
RAIT Financial Trust |
29.3% |
**** |
|
Homex |
19.5% |
**** |
Data and star rankings from CAPS as of May 1.
E-House
Chinese property sales dropped sharply in 2008, in tandem with the U.S. real estate market collapse that has created extensive challenges for companies including KB Home
It has built strong relationships with major developers, and China's stimulus spending is starting to show a positive impact on affordability for homebuyers. Shares have been gaining recently as China's property sales increased 8.2% in March, and many CAPS members have the stock on their buy list, with many citing the company's potential when a rebound arrives.
In fact, 96% of the 604 CAPS members rating E-House expect it to outperform the market.
RAIT Financial Trust
While the focus of real estate anguish may be on the residential side, defaults on loans in the commercial real estate market are expected to rise this year, which could create increased pressure on RAIT's operations. The real estate investment trust (REIT) is involved in commercial real estate financing through a number of different debt instruments available to borrowers. To deal with its risk exposure, the company has cut its compensation and general and administrative expenses and says it has sufficient cash flow to pay the $33 million of debt that matures this year.
Many CAPS members see the company's cash dividend as one of its more attractive features. But even though the REIT is required to pay out at least 90% of its annual taxable income (unless it changes its status), it may opt to pay in shares, as Simon Property Group recently decided to do.
At this point, 91% of the 350 CAPS members rating RAIT remain bullish and see it outperforming the broader market.
Homex
The decline of the global economy has hit shares of Mexico-based companies like America Movil
While U.S. builders like Toll Brothers have created big incentives to attract buyers, government financing has helped many buyers in Mexico, giving Homex an increased market share nationwide. The Mexican government has big goals to increase homeownership; the growth in first-time homebuyers is expected to continue, with government agencies predicting large growth over the next couple of decades.
With that kind of wind in its sails, nearly 96% of the 300 CAPS members rating Homex expect it to beat the S&P.
Let 130,000 members be the jury
The collective wisdom of a huge pool of investors can help give context to a page of numbers from a stock screen, but individual investors are still the judge. Fools should always perform their own due diligence.
To get started, run your favorite factors through the Motley Fool CAPS screener. It's totally free, and we think you'll like the results.
