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.
Arch Coal (NYS: ACI)
First Solar (NAS: FSLR)
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
Looking very much like the natural gas industry these days, the coal industry is being racked by weak demand that's sending prices lower and causing miners from Arch Coal to Patriot Coal (NYS: PCX) to cut production. According to an analyst at Barclays, U.S. coal producers have announced 40 million tons of production cuts so far as U.S. power plant demand is running about 20% lower than last year.
Peabody Energy has escaped the worst of it because its Australian mines are able to supply Asia, but that hasn't stopped its stock from sagging as earnings are forecast to sag, barely rising this year, and falling precipitously in 2013.
While the coal industry is looking like the gas industry, it's because of the economics of the latter that the former is falling on hard times. Because gas is at its cheapest level in decades -- prices are running less than $2 per million Btus -- utilities are switching from coal to gas. Coal is under pressure because of new air quality regulations that are also tamping down demand. The economics of both, though, aren't favorable for the main players and Arch is looking to sell off some assets. It's expected to report earnings tomorrow that will see profits slashed 44% from the year-ago period while Alpha Natural Resources (NYS: ANR) , which reports later in the week, is expected to swing to a loss.
CAPS member BostonDealFinder says today's Arch price represents a good buy for the long-term investor:
Will it drop more? Probably.. Will it go way up from here in the future? Without a doubt! Bought with real money $9.42.
Add Arch to your watchlist and then let me know in the comments section below or on the Arch Coal CAPS page if there's reason to believe it can dig its way out of this morass.
First Solar also reports earnings this week, but there's no reason to have a sunny disposition about what's likely to come out. Two weeks ago it announced a surprise restructuring to reflect what's going on in Europe, so it's going to be hacking away at costs that will allow it to right-size itself to a sustainable level. It's cutting 30% of its workforce and idling four production lines in Malaysia.
CEO Michael Ahearn said the company did a thorough analysis and came to the conclusion that the market for solar energy just isn't there without substantial government subsidies. First Solar had been built up around manufacturers and consumers getting handouts to build and install solar systems, particularly in Europe, but today's reality is one of having to scale back and downsize.
While it's good the solar specialist has finally taken this course, it's been apparent for some time now what the reality was. When I marked First Solar to underperform the indexes on CAPS last November, it was with the realization that solar is crippled without subsidies. I was late to the game, but the stock has fallen 60% since then. It's why I've also rated a host of solar players to decline, including Suntech Power and JA Solar (NAS: JASO) . It's why CAPS All-Star Chemdawg holds similarly negative views on First Solar:
rearranging deck chairs on the titanic... how pretty that is....too bad the solar industry is just a government supported money loser long term... wonder what happens when the government can't afford to subsidize bad businesses?.... i would hate to put my money on the line for that .....
Add First Solar to your watchlist and let us know on the First Solar CAPS page if you agree that sooner or later it's going to be lights out for many in the solar space.
A chance for scary growth
It takes more than a few All-Star picks and a quick pitch to make buy or sell decisions, so start your own research on these stocks on Motley Fool CAPS and marvel at the range of opinions there.
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At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of First Solar. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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