2 Stocks That Just Raised the Bar

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No one knows a company better than those who run it. That's why investors will often watch for when insiders are buying company stock or companies are buying back their own shares. These can be bullish signs for a company.

Offering earnings guidance above analyst expectations is also a bullish sign, as over time earnings growth follows sales growth. When a company predicts greater sales profits, we expect its stock price to soon follow.

Sometimes, though, things don't work out as planned, so we'll pair up the increased outlook with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best and brightest stock pickers think a company's long-term potential is outstanding, coupled with the company's own improved sentiment, maybe then investors should take notice, too.

Here are two stocks that recently raised guidance.

Stock

CAPS Rating
(out of 5)

Prior or Consensus Estimate

Current Guidance

Period

LSI Logic (NYS: LSI) ****$0.12*$0.12-$0.16*Q1 12
Vanguard Natural Resources (NYS: VNR) *****$1.71**$2.25**FY 12

Source: Company news releases. *Non-GAAP income from continuing operations per share. **Adjusted net income per unit.

Don't blindly buy into their heady outlook -- you still need to do some research. Use this information as a jumping-off point for additional research.

A healthy drive for more
Investors are attuned to the benefits certain drive makers derived from the floods in Thailand, with Seagate Technology (NAS: STX) and Western Digital enjoying higher prices and customers trying to lock in long-term supply agreements in the event of future devastation. However those same factors are also assisting LSI Logic, a chip designer whose largest customer is Seagate, accounting for 25% of its revenues in 2011.

Yet some analysts think the good times may be over, and with the chip maker experiencing a big run-up in its stock -- it's up more than 50% year to date and almost 90% from the lows it hit in October -- the chance for a correction looms large.

There is consolidation under way in the hard drive market, and while that could open up new opportunities for the chip maker, it also could make it more dependent on Seagate, which opens up greater customer risk.

The CAPS community seems to side with the outlook that there's more growth in store, since of the 490 CAPS members rating LSI, almost 90% see it beating the market averages. Tell us on the LSI Logic CAPS page whether you think it will drive forward further, then add the stock to your watchlist to see if the growth story remains intact.

Acquiring an interest
Permian Basin oil and gas producer Vanguard Natural Resources led the way ahead as quarterly earnings crushed analyst estimates, with sales more than tripling to $86 million and production tripling as well, helped along by recent acquisitions. On a GAAP basis, losses widened, but adjusted earnings showed profits of $0.76 a share.

The oil and gas industry is seeing a burst of acquisitions these days, as Linn Energy (NAS: LINE) is using the opportunity to buy up attractive assets. It recently spent $1.2 billion for BP's natural gas assets in Kansas and $175 million for properties in East Texas. Meanwhile, Vanguard has been a seller as well as a buyer, shedding some non-core Appalachian assets.

CAPS member rurbey likes Vanguard's dividend, which is currently yielding 8.3%, while fooluser17 agrees even while taking note of its high debt levels:

High level of borrowing and high payout ratio...BUT I do like the consistently increasing dividend and the oil industry. I'd put this one at a strong buy...probably make this 5% of real portfolio.

Add the oil and gas producer to the Fool's free portfolio tracker and tell us on the Vanguard Natural Resources CAPS page or in the comments section below if the increased outlook also increases your interest.

Raise your sights
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At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Western Digital. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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