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
|rijoker||98.70||Las Vegas Sands||861.41||Annaly Capital Management (NYS: NLY)||****|
|Kelsoner||99.12||DB Gold Double Long||366.48||Silver Wheaton (NYS: SLW)||****|
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.
Focusing on the future
With the Federal Reserve saying it plans to hold interest rates at near zero percent until 2014, investors can assume the low-rate environment will continue to be beneficial to mortgage REITs that have been doing fairly well in the current low-rate environment and have been rewarding investors in the process.
Chimera Investment (NYS: CIM) is up 18% in 2012 and pays a dividend currently yielding 15.6% while American Capital Agency (NAS: AGNC) has jumped 21% this year while paying out an almost identical yield. Even RAIT Financial Trust, whose shares have fallen 11%, still pays investors a dividend yielding almost 8% as they await the turnaround.
Then there's Annaly Capital, considered the premier residential mREIT. While it hasn't soared like some of its brethren (up 8%) even as its dividend remains healthy (13%), it does all this typically with a bit less risk.
Of course, "less risk" doesn't mean "no risk," and there's a possibility Fed Chairman Ben Bernanke will need to raise interest rates well before 2014. Should they start to rise sooner rather than later, agency-only mREITs like Annaly will likely feel the pinch more acutely. However, it has been reducing its leverage over the past year as yields have gotten lower and could be better off than its rivals if things start to unwind. A new collapse in housing, which is not as impossible as it might sound, could take down Annaly along with lesser mREITs as well.
Yet as TMFBigFrog points out, Annaly has shown itself adept at navigating the market's ups and downs: "Annaly has proven itself capable of managing through tough cycles, having been around since 1997 and still going strong. That staying power makes it one of the few companies in its industry worth considering."
Add Annaly to your watchlist and then let me know in the comments section below or on the Annaly Capital Management CAPS page if you think there's a reversal of fortune in its future.
With Goldcorp's (NYS: GG) Penasquito mine being finalized, silver streaming specialist Silver Wheaton will enjoy more than 7 million ounces of silver production annually, up from 5.3 million in 2011. Furthermore, it's expected to average 9 million ounces annually over the first five years from Barrick Gold's Pascua-Lama mine, when it enters production next year. That alone sounds like a good reason to stick by Silver Wheaton.
It's also able to dodge a lot of the macroeconomic conjoining of silver and its industrial uses because of its low, fixed-cost business model that allows it to turn $0.82 of every dollar generated into profit, meaning the macroeconomic pressures on sovereign debt herald a bullish opportunity in silver, particularly in Silver Wheaton. Greece is falling apart, Spain is crumbling, and now Italy is once again in the forefront as its bond sale missed the maximum target and yields surged.
The price of silver has dropped precipitously, as has gold, but with so many irons in the fire and with a ridiculously low cash cost base, Silver Wheaton remains a bargain at current prices. It may have bounced off its absolute lows, but shares are still down 37% from their 52-week peaks. mhonarvarthe2nd puts the business into perspective: "buys silver real cheap...then sells it at market price...easy money."
Add the silver streamer to your watchlist and let us know on the Silver Wheaton CAPS page if you think international turmoil will set off a new round of pricing spikes.
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. While you're at it, see the one stock The Motley Fool thinks is changing the face of business. The new special free report highlights the only tech stock you'll ever need to own, and it's yours free!
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. Motley Fool newsletter services have recommended buying shares of Annaly Capital Management. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.