These High-Flying Stocks Could Take Off

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If there's something that can keep this market down, it's yet to occur. Bad news can't keep the Dow down for long. Surprises can't stun the S&P. Indexes have been steadily moving higher all year, to the delight of stockholders and the annoyance of perma-bears. In the crowd of outperformers is an elite group of stocks that have trounced the market. Some are valued optimistically, but others are just getting started. Today, I'd like to share with you a few highfliers that look set to continue their amazing runs into the future.

Strap a rocket on 'em
To ensure that my search wouldn't pull up any inflated long-term valuations, I looked for stocks that had not only grown substantially, but that are also expected to continue such growth into the coming years, and that appear to be cheap on a longer timeline. The market might be underestimating these stocks now, but not for long:

Company

Current P/E

1-Year Price Change

Projected 5-Year Earnings-per-Share Growth (annualized)

Forward P/E

Seagate (NAS: STX) 13.62119.8%20.6%3.24
Kodiak Oil & Gas (NYS: KOG) 201.264.7%42.5%7.56
BE Aerospace (NAS: BEAV) 21.1537.4%20.5%13.91

Source: Finviz.com.

Store your value here
Seagate isn't quite cast in the young-start-up mold that typifies many of the companies on my screen. In fact, its past earnings growth has been a bit anemic at times. But things are different now. Waves of consolidation have left Seagate and rival Western Digital (NYS: WDC) on top of the hard drive market for the foreseeable future, and de facto duopolies offer better pricing power than a field full of starving young competitors.

Recent floods near key factories also wound up being more damaging to Western Digital's operations, leaving Seagate a key window of opportunity to grab market share. The floods also gave Seagate an opportunity to restructure its entire distribution model, which seems popular with the industrial-scale customers that buy many of the company's drives.

Seagate also has key opportunities to offer server and cloud storage, which is a market that should only grow as data use keeps increasing worldwide. Another advantage Seagate has is its high dividend yield, one of the best in computer hardware and a much more enticing bonus than Western Digital's big dividend goose egg. That ought to cushion Seagate against any unexpected market drops, and keep it rising in good times as well.

Up through the ground came a-bubblin' crude
Kodiak is growing like kudzu vine in the Bakken, and its plans are nothing if not ambitious: Expecting to double daily production by the end of the year is nothing to sneeze at. As one of 2011's best energy stocks, Kodiak's pace of progress has improved its growth outlook by a lot in a short time. At the end of last year, its estimated growth rate was half what it is today.

Despite its triple-digit P/E, some (including myself and my Foolish colleague Isac Simon) believe the company's stock might even be considered cheap. Fool analyst Dan Dzombak thinks that Kodiak might be ripe for a buyout, but macroeconomic trends are favorable for the company's continued success, even without digging into the deep pockets of a big-daddy driller. We've heard quite a lot about the high price of oil, and there's little reason to expect it to decline as high-growth regions like China and India push for greater prosperity.

Take flight in style
BE Aerospace has an interesting business model that might not be too familiar to many investors, unless those investors happen to be regular travelers. BE provides a wide range of products to make aircraft interiors more comfortable and more functional, a niche it's ridden to high growth in a competitive industry. Boeing (NYS: BA) and Airbus are sitting on years of backlogs that BE can play its part in. Don't be worried about the company being overly reliant on the two aircraft giants; BE's highly diversified client portfolio gives it both insulation and support from any sudden industry shocks.

Much of BE's recent gains have come since the beginning of the year, as the company finished 2011 in a bit of a funk. BE's own backlog is worth billions, and thanks to anticipated travel strength this year, it could grow even larger. There's going to be turmoil in the industry, as there often is. But flights will always need comfortable chairs, food management systems, bathrooms, and other components that BE provides. There aren't many companies with more diverse means to profit from a passenger boom, which makes BE worth a closer look.

Foolish final thoughts
I think all three companies have room to run, and I'll be giving them all outperform ratings in Motley Fool CAPS to hold myself accountable to these calls. I hope you agree with me, but if not, I'd love to find out why, so let me know your opinions with a comment. If you're looking for another stock with a ton of potential, The Motley Fool's recently put together a free report on one rule-breaking company that's already a multibagger for our Rule Breakers subscribers. It's not done growing yet, so claim your copy today for everything you need to know. Just click here to find out more.

At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of Western Digital. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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