Is Everyone Still Saying to Buy Now?

For two months now we've been tracking stocks that have such great potential that "everyone" knows they are a good buy.

We argued that if we knew beforehand that Best Buy (NYSE:BBY) was going to return more than 2,200% over the past decade, we'd have mortgaged the house to the hilt. Had we had the inside scoop that Celgene (NASDAQ:CELG) was a greater than 7,000% winner in that time period, we'd have mortgaged your house too!

In fact, if investing were so easy, we'd all be millionaires. It's easy to see after the fact which companies have been the winning investments. What we've said is we need a way to know beforehand which companies will become the next General Electric, growing tens of thousands of percent in value over the years.

Until now we haven't had a way, but we've been doing something unique to put the odds in our favor.

More than 60,000 professional and novice investors have rated stocks on Motley Fool CAPS, and we can check in on their opinions about which stocks will beat the market and which will lose to it. While it's often a tug-of-war between the bulls and the bears, we've identified dozens of stocks that CAPS members have unanimously chosen to outperform the market.

That's no small feat. Thousands upon thousands of companies have been rated, and convincing arguments can, and are, made on both sides. For example, Motley Fool Hidden Gems recommendation Hercules Offshore (NASDAQ:HERO) is a top-rated stock where 559 CAPS investors have rated the company. Yet while 549 of them think the stock will beat the market, that still means there are 10 CAPS investors who don't.

So when you come across a stock that everyone thinks is going to outperform, you've got something special, and we as investors ought to take notice.

While two months is really too short of a time period to measure overall success, we want to see how we're doing against the market. Winning in an up market may not be so tough, as "a rising tide lifts all boats," so we want to see whether we can stay ahead of the market when it's down like it's been. Here are the results so far.

Hmm. That doesn't appear good at first glance. Our top stocks are off on average of nearly 5% since they were highlighted. However, when we compare that to how the market has performed -- and we see that it's down an average of more than 7% -- it seems our picks are generally doing better.

Insurance for the insurers?
What's happened with XL, though? It's obviously the laggard of the bunch and is performing much worse than the market. The insurance and reinsurance provider had been holding its own until the end of July, when the subprime market mess really took a hit. It has a strong investment portfolio, and although it has recently reported that it had $600 million more exposure to collateralized debt obligations (CDOs) than previously announced because of a change in what it considers a CDO, it has not changed its debt or subprime mortgage exposure.

Insuring risk has been a successful play for the company, and it saw a 560-basis-point improvement in its combined ratio. It would seem that XL, like many insurers that need to invest collected premiums in stocks and bonds, is being hurt these days through guilt by association. The capital markets are being roiled and XL is taking its licks.

Interestingly, XL remains the only stock of those originally highlighted that retains its unanimous endorsement by CAPS players. In fact, it's gained an additional three investors who think the company will outperform the market over the long term.

Analyst and market research firm Netscribes earlier noted the strong financial position of the company along with an attractive valuation: "The financial position of the company looks excellent with solid return on equity and its interest rate sensitivity completely diversified among U.S, U.K and other European markets. It is trading at an attractive price with a lower book value comparing to its peers and is going for a bull run."

It's that sort of sentiment that had CAPS player iceman1937 endorsing its prospects by saying, "Strong and diversified insurance companies should always be in favor."

Let's hear from you
How about you? Do you think they're still "obvious" winning investments? If you want to add your two cents, sign up to join the Motley Fool CAPS community, which is 100% free.

Hercules Offshore is a recommendation of Motley Fool Hidden Gems. A 30-day free trial subscription gives you the chance to see the logistics of all the stock selections that are currently collectively beating the market by 33 percentage points.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. Best Buy is a Stock Advisor and Inside Value recommendation. The Motley Fool has a disclosure policy.