No one has perfect foresight, but let's be honest: The market is full of people who, as Oscar Wilde would say, know "the price of everything and the value of nothing." Far too often -- over the past year especially -- investors have been pitched sensational stock recommendations only to be left high and dry as shares crumble.
To hunt down top-recommended stocks that have been rewarding investors accordingly, I summoned our Motley Fool CAPS community to point out a few four- or five-star stocks that have been shootin' for the moon in recent months.
While they're not formal buy recommendations, these three-month bloomers caught my attention:
| Company | 13-Week Price Change | Recent Share Price | 2009 EPS Estimates | CAPS Rating |
|---|---|---|---|---|
| Colgate-Palmolive (NYSE: CL) | 22% | $73.34 | $4.24 | ***** |
| Kellogg (NYSE: K) | 21% | $47.80 | $3.09 | **** |
| Marvel Entertainment (NYSE: MVL) | 32% | $37.11 | $1.35 | **** |
| TexasInstruments (NYSE: TXN) | 21% | $20.42 | $0.75 | **** |
| U.S.Steel (NYSE: X) | 21% | $30.50 | ($10.05) | **** |
Data from Motley Fool CAPS and Yahoo! Finance as of July 8.
You can rerun the CAPS screen I used by clicking here.
A deeper look at Colgate-Palmolive
There's a healthy debate raging these days about whether branded products made by the likes of Colgate and Procter & Gamble (NYSE: PG) will succumb to cheaper store-brand names provided by retailers like Costco (NYSE: COST).
It's undeniably true that as we save more -- which we're doing, in a big way -- we tend to scale our purchases down toward cheaper products. For consumers, it's the easiest way to save money while not completely cutting material aspects out of daily life. This is unquestionably bad news for companies reliant on selling branded products for a premium.
But this argument can be effectively neutralized by two points:
- Most consumer-staple stocks trade at historically low valuations, which already price in a heavy slowdown.
- Companies that sell premium products for low dollar amounts -- such as soap, toothpaste, and deodorant -- aren't as affected as higher-dollar-amount items. Saving a buck on toothpaste isn't as important as saving a few hundred bucks with store-name clothes.
As I showed a few weeks back, that's currently the case with Procter & Gamble. P&G is trading at a dramatic discount to its historical average multiples. And while growth might be stalling out, we're not talking about the kind of cliff-diving trouble facing high-end discretionary companies.
Colgate is in the same boat, with its shares currently trading at approximately 17 times 2009 earnings. That might seem absurd for this market, but perspective is in order. Going back to 1992, Colgate has commanded an average earnings multiple greater than 27. The nature of its products is both nondiscretionary and highly brand-sensitive in good times and bad. As CAPS member samstevens writes:
solid company with a pretty safe market. no one's gonna stop buying toothpaste. Their customers will probably stick with them, i mean, people have their favorite toothpaste, its not like they're gonna just switch. They've also been really strong this past year.
CAPS member STOCKBUSTER1 seems to agree, writing:
Good company which makes products used everyday in everyday life. Recession resistant and recent raise of the dividend assures this company isn't going anywhere anytime soon. Buy for the long term!
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