7 Stocks With a Bright Future

Investments that have been successful over the long term almost assuredly share at least one thing in common -- growth. You'll be able to find very few companies that have been unable to increase their earnings and yet still have produced good returns for shareholders.

Think about it this way: Dividends aside, investors reap their gains when a company's stock price goes up. The stock price is typically driven by two levers, earnings and the multiple that investors are willing to pay for those earnings. Since earnings multiples tend to fluctuate within a certain range, long-term investors should have a keen focus on the company's ability to increase earnings.

Does it seem too simple? Maybe keeping it simple is a good plan sometimes. After all, as Third Avenue's Marty Whitman has put it:

Based on my own personal experience -- both as an investor in recent years and an expert witness in years past -- rarely do more than three or four variables really count. Everything else is noise.

With that in mind, I've kept it simple and dug up five stocks that analysts expect to notch long-term earnings growth of 10% or better. I've also pulled up the CAPS rating for each stock to show what the 140,000-member Motley Fool's CAPS community thinks of the companies' prospects.

Sources: Capital IQ, Yahoo! Finance, and CAPS. P/E = price-to-earnings ratio.

Wall Street analysts aren't known for being supernatural in their forecasting skills, so not all of these estimates may pan out. However, this list may be a good place to dig in for further research -- in fact, I'll even get you started with some thoughts on a couple of these stocks.

Cool to the touch?
With a lousy two-star rating and more than 470 underperform ratings, it's clear that CAPS members have some major reservations about Best Buy's stock. The reason is very clear -- struggling consumers and what they mean for a company that sells highly discretionary items like flat-screen TVs.

CAPS member Paramnesia1930 gave the stock a thumbs-down in late August, saying:

Behind all the so-called "positive" news lies corporate cost cuts, elevated jobless rates, wage deflation and continued pressure on personal consumption expenditures.

I'm leery myself of stocks that are strongly tied to consumer spending, but don't tell that to Best Buy's management team. The CEO recently proclaimed his faith in the company's earnings guidance for the year, and noted stability in customer traffic. If this holds true it could certainly be good news for the company as it moves into its biggest sales period of the year.

Bringing the heat
But what about high growth and a high rating from the CAPS community? For that we can turn to Sysco.

Though the name sounds like that of the network equipment maker, Sysco's business of distributing food to restaurants, hospitals, and hotels couldn't be more different. Of course Sysco has faced its own pressures in the distribution business as tough economic conditions and penny-pinching consumers have taken a hit on restaurants.

But in the midst of this, Sysco is practically the picture of stability. When it announced its full-year financial results in August, it showed a mere 1.8% drop in revenue and 4.5% slide in profit. And the company recently announced its 159th consecutive dividend -- a streak that's nothing to sneeze at. Even without robust economic growth, we should see Sysco's profit bounce back as we head into a recovery period.

On CAPS, the stock has gathered more than 940 outperform calls against just 29 underperforms and sports a shiny five-star rating. Just recently, CAPS member aitraders gave Sysco's stock a thumbs-up:

one of the only stocks not moving as the market rallies. So the market believes more in housing than it does in restaurants? They have $1 b in cash, $1 b in free cash flow/year, paid a dividend for 38 years, and by many reports continue to gain market share and set it sights on acquisitions in this trying market. ... They also have an extremely successful network of distribution centers making them a large moat, dominant company in their field. ... When many are still expecting a market correction, the dividend could even make this stock a 'safe haven' pick in any outcome.

But what do you think?
Do these stocks have what it takes to post solid growth in this economy? Or have analysts been too optimistic? Head over to the free CAPS community and let us know what you think of Sysco, Best Buy, or any of the other stocks listed above.

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