Tomorrow's Monster Stock
Stocks climbing to 10 times their original price are rare breeds -- but they're not impossible to find. Especially when you have Fools for friends.
The market's best stocks include companies that have risen dozens of times in value by taking advantage of the market's weaknesses. These aren't penny stocks; they're viable companies with sound business prospects that are achieving phenomenal returns. Finding just one or two of these monstrously successful firms can help you establish a winning portfolio.
Stalking the monster
To find tomorrow's winners, we've enlisted the help of more than 180,000 monster trackers at Motley Fool CAPS. We've compiled a list of the most successful CAPS members, dubbed All-Stars, whose picks have doubled, tripled, or even quadrupled in price. Then we've plucked out some of their recent picks for stocks they find equally promising.
Recent Stock Pick
|smcnei2||99.34||Precision Drilling Trust||514.74||ArcelorMittal (NYS: MT)||****|
|CNBL||98.01||Teck Resources||924.55||JinkoSolar (NYS: JKS)||*|
|translator999||99.96||Atlas Pipeline Partners||1234.63||McDonald's (NYS: MCD)||*****|
Score is how many percentage points that pick is beating the S&P 500.
Of course, this is not a list of stocks to buy -- or, for those monster stocks that our CAPS All-Stars have already found, sell. Just consider them starting points for your own further research of extreme buying opportunities.
Hiding in plain sight
Moderating growth across the steel industry, even in emerging markets like China and India, has led to depressed valuations among steel giants such as AK Steel (NYS: AKS) , Mechel, and ArcelorMittal, all of which trade for less than half their 52-week highs.
While world steel production was up 10% in September, the financial crisis in Europe is creating a level of uncertainty that will affect valuations going forward. Investors should concentrate on the strongest players, including U.S. Steel (NYS: X) and Arcelor. The latter reported a 23% increase in revenue last quarter, and EBITDA in the second half of the year is expected to exceed that achieved over the first six months. Still, like others in the space, it is focusing on core operations, which means it will delay some planned investments in its business, perhaps holding the stock down for some time.
With almost 2,100 CAPS members weighing in on the metal shop, 97% still believe it will go on to beat the Street. Let us know in the comments section below what you think of the situation, then add ArcelorMittal to your watchlist to see whether it cracks under the pressure.
A long time coming
If the sun's still shining, then hope springs eternal for solar power investors. But everything isn't sunny for the CAPS Solar Power sector as stocks in the niche are down 15% on average over the past 30 days. Trina Solar (NYS: TSL) , JA Solar (NAS: JASO) , and a host of other names are reporting results that serve up a cloudy view of the industry's future.
Trina saw revenue drop year over year, but more ominously, it fell far more steeply on a sequential basis indicating the industry is cooling off in the face of an inventory glut. JA also reported sharp declines in sales. Moreover, polysilicon makers seem hell-bent on producing ever-greater amounts of the stuff, driving down prices and wreaking havoc on margins.
JinkoSolar actually had higher revenue year over year, but like Trina, it saw sequential declines in shipments. Higher inventories, lower prices -- it all combined to slash net profits by nearly three-quarters. Without the government propping up the industry, solar players are finding there's not as much demand as thought.
As CAPS member cjlee001 points out, without subsidies skewing the results, it's a pretty arid landscape it's operating in:
the entire industry needs government backing to be even remotely competitive with fossil fuels. hmm... what government has that kind of money right now? and even if they did, i don't think clean energy will be a priority on any budget.
You can let us know on the JinkoSolar CAPS page if you think there are sunny days ahead, then add the stock to the Fool's free portfolio tracker and see whether the bulls or bears have it right.
A rocket higher?
You might already think of McDonald's as a powerhouse, and it is, but that doesn't mean it won't keep growing. It just reported same-store sales jumped 6.5% in the U.S., where it derives 31% of its revenue, while Europe saw a similar increase in comps but represents more than 40% of total company sales. Even in emerging markets like Asia-Pacific, Middle East, and Africa, sales rose 8.1%. All of these numbers, by the way, far exceeded analyst estimates of how this huge restaurateur would perform.
It's clear the international market is where McDonald's real opportunity lies, from expanding sales to widening margins, the world is just a Happy Meal away from breaking the next sales goal. CAPS member 1stMartian says the burger flipper represents a tasty morsel for everyone's portfolio: "Good cash flow, ROI of 15%, nice dividend, and everyone likes a big mac every once in a while."
Tell us in the comments section below or on the McDonald's CAPS page if you think floundering global economies make a prime target for its value menu, and add it to your watchlist to check on its progress.
At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of ArcelorMittal. Motley Fool newsletter services have recommended buying shares of Precision Drilling and McDonald's. 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.