5 water-cooler stocks worth a look
When members of the CAPS investment community gather online to talk about stocks, these are among the companies dominating the discussion. But which are worth buying?
This post comes from The Motley Fool's Rich Duprey.
Whether it's the corporate lunchroom, your cubicle or the local watering hole after work, there are regular places you gather to discuss news, sports and -- if you're like us -- stocks.
Here at MSN CAPS, we gather 'round the virtual water cooler daily to rate stocks and delve into their merits as investments.
The 150,000 investors in our CAPS community -- where members give the thumbs up or thumbs down to nearly 5,400 stocks -- seek companies they think will outperform the market.
Our data indicate that newly minted five-star stocks offer some of the best investment opportunities, while the lowest-rated companies have fared worse than their peers.
Let's look at some of the most popular and talked-about stocks in the CAPS universe and examine whether they might continue their winning ways.
China Petroleum and Chemical (SNP), commonly called Sinopec, is China's largest refiner and petrochemical producer. The company has a four-star rating, and 95% of CAPS members rating the American depositary receipts expect them to outperform.
iRobot (IRBT) makes robots for various uses, including cleaning floors, exploring the ocean depths and defusing bombs. The company has a three-star rating, and 88% of CAPS members rating the stock expect it to outperform.
Petrohawk Energy (HK) produces natural gas and oil, primarily in the south-central U.S. The company has a four-star rating, and 96% of CAPS members rating the stock expect it to outperform.
Sysco (SYY) is North America's nation's largest distributor of food service products, with 400,000 customers and 180 distribution centers. The company has a five-star rating, and 96% of CAPS members rating the stock expect it to outperform.
Trinity Industries (TRN) makes rail cars. The Dallas company also leases and manages rail car fleets. The company has a five-star rating, and 97% of CAPS members rating the stock expect it to outperform.
Taken to the cleaners
Does iRobot sell enough self-cleaning robot vacuums to justify analyst expectations of 25% annual growth? No, but the Bedford, Mass., company doesn't have to. While the home robot segment of the business grew 13% in the fourth quarter (that's a lot of bots cleaning floors, gutters and swimming pools), its contract work for the government and industrial customers grew more than 36%.
Admittedly, the government and industry market is smaller than the consumer segment (where iRobot's Roomba and Scooba have for years been the gold standard for housecleaning bots), but as the military's use of robots grows, the sector should become the main driver of iRobot's revenue. The backlog of orders in the government and industry segment recently totaled $42 million, the highest level in company history.
As iRobot becomes more of a military contractor -- and, no, the Defense Department isn't buying vacuums, but rather tactical robots that investigate suspicious objects through video, audio and data sensors -- it's going to compete with established contractors such as Boeing (BA) and Lockheed Martin (LMT). That could be a trickier situation.
Some investors support the dual-track approach, however.
CAPS member "rlipsitz" adores the buzz surrounding the Roomba but appreciates the military side of the business.
"Agree this is not sound fundamental approach but I'm going with Peter Lynch on this one," rlipsitz recently wrote. "My wife wants to get one. . . . (I've) researched the Rhoomba (sic) and we will get. Positive buzz about this product all over the web. Almost everyone is satisfied on Aazon (sic) comments. Company continues to improve product plus they are expanding pipeline of products. . . . Plus, tremendous military potential/under developments. Already a profitable company, so I'm in."
While a slice of the CAPS community thinks the stock is going to underperform the broad market averages, 88% of the more than 1,100 members who rated the robot maker think it's going to outperform. You can add your opinion on the iRobot CAPS page.
Delivering the goods
Higher sugar prices aren't so sweet for Sysco and other food wholesalers, which are caught between rising commodity costs and falling sale prices as consumers continue to opt for private-label goods. Sugar prices recently reached their highest level in three decades, pinching Sysco's first-quarter profit.
With 97% of CAPS members rating the Houston company to outperform the market, "JCastroman" is among those who see the company coming out of the situation in stronger shape than many of its rivals. The CAPS participant predicts that the recession will force consolidation in the sector, and thinks moves Sysco is making to reorganize its business and focus on its brand will ultimately pay off.
Grab a pointy paper cup from the dispenser and join us at the CAPS cooler. Your input can help guide other investors to stocks with bright growth prospects. Go to a company's CAPS page to get financial reports, key data and charts. You'll also find comments and observations that your fellow investors have made.
Sign up at CAPS today for this completely free service, and let us hear what you have to say about the great and almost-great companies that interest you.
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