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:
|
Stock |
Recent Price |
CAPS Rating
|
Bull Factor |
|---|---|---|---|
|
Atrion |
$135.25 |
***** |
97% |
|
China-Biotics |
$16.35 |
**** |
96% |
|
Female Health |
$4.82 |
**** |
96% |
|
Rackspace Hosting |
$14.50 |
*** |
93% |
|
American Capital Agency |
$23.89 |
*** |
90% |
Companies are selected from the "New 5-Year Highs" list published on MSN Money on Friday. CAPS ratings from Motley Fool CAPS.
Everybody loves a winner ...
And every once in a while, a "truism" gets it right. The five stocks topping the market averages this week certainly get a lot of love from investors, with 90% or more of the people who've rated them on CAPS expecting each of them to keep on outperforming.
As for which of these stocks Fools love most, though, it's no contest. The verdict is as clear as the name is ... well, unfamiliar. But if you've never heard of the lone five-star stock on today's list, that's a situation easily remedied. Let's take a few minutes now to examine:
The bull case for Atrion
dcrednek introduced us to Atrion way back in January of '07 as "a medical products company in Bethesda," and "a nice play in undervalued, micro-cap sector. The management team has done and continues to do a great job of building the company, both top line and bottom."
CAPS All-Star tdomalley found Atrion even earlier. Writing in the summer of 2006: "There's always going to be demand for healing the sick and injured. Solid management continues to deliver wellness to investors quietly over time." And how has that logic worked out? tdomalley's beating the market by nearly 120 percentage points on this pick.
More recently, fellow All-Star investor echofarmer was attracted by Atrion's "$5/share" in cash, "and no debt."
Which sounds good, but is in fact even better. Atrion's pile of cash and short-term investments stands at better than $10 a share. Sure, Atrion may not be in the sexiest segment of the medical devices sector. While Intuitive Surgical
But a humdrum business doesn't do a thing to keep Atrion's profit machine from humming. Over the past 12 months, Atrion has generated $17.7 million in free cash flow -- about 10% more than the company reports as net earnings under GAAP. This gives the stock a quite reasonable enterprise-value-to-free-cash-flow ratio of 14. Not at all shabby, considering that Atrion has managed to grow its profit at an annualized rate in excess of 25% over the last five years.
As for how it will perform in the future -- that's both the bad news and the good. Just one analyst provides an estimate, which offers a chance for significant earnings surprises. Consider how fast it has already proven it can grow.
Time to chime in
This lack of visibility may keep some investors away from Atrion -- but the way I look at it, this just gives us a chance to buy the stock now, when nobody's looking. With a great price on the stock, no debt, plenty of cash, and a demonstrated ability to earn more cash, I have to admit: Atrion looks mighty tasty.
But that's just my opinion. What we'd really like to know is what you think about the company -- are you brave enough to look past the triple-digit stock price, and see the value that lies within? Or conversely, do you worry that this little stock has moved too high, too fast? Click on over to Motley Fool CAPS and tell us what you think.
