Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and discover the 10 best stocks of the past decade. I'm more interested in tools that can help me evaluate tomorrow's greatest companies.
Motley Fool CAPS offers a variety of resources to help Fools find tomorrow's leaders. Our community of 135,000-plus members is full of investors helping one another beat the market.
We'll enlist CAPS to screen for contrarian investments, then get the story behind some of the more highly rated stocks. CAPS' nifty screener will help us find stocks with:
- A market cap of at least $500 million.
- A long-term debt-to-equity ratio of less than 0.5.
- A share price at least 50% below its 12-month high.
- An earnings-per-share growth rate of at least 15% over the past three years.
- A price-to-earnings ratio of less than 25.
Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.
Opinions with the numbers
Below is a sample of stocks our screen returned. You can run this screen yourself -- remember, though, that your results may differ from ours as the market changes.
| Company | EPS Growth Rate, | % Below 12-Month High | CAPS Rating |
|---|---|---|---|
| National Oilwell Varco (NYSE: NOV) | 42.9% | 53.5% | ***** |
| Mahindra Satyam (NYSE: SAY) | 24.2% | 77.3% | **** |
| Nokia (NYSE: NOK) | 20.4% | 51.7% | **** |
Data and star rankings from CAPS as of Aug. 7.
National Oilwell Varco
The earnings of oilfield services company National Oilwell Varco took a hit in the second quarter, yet the company still managed to beat Wall Street expectations amid a weak drilling market that has prompted other players, like Schlumberger, to offer a cautious outlook. Its global rig count dropped in the second quarter compared with the first quarter, and National Oilwell Varco experienced a drop in backlog, but it still maintained its projection of $3 billion to $4 billion in backlog additions for the year. Although the company says it's too early to say we've turned the corner, many CAPS members are bullish on a recovery, anticipating that increased oil demand will bring demand for equipment and services. The company has a strong balance sheet, with more than $2 billion in cash, and expects to emerge strong when drilling activity resumes.
In CAPS, 98% of the 2,899 members rating National Oilwell Varco expect it to outperform the market.
Mahindra Satyam
Mahindra Satyam (formerly Satyam Computer Services) continues to rebuild its image after the accounting scandal that gouged much of the company's value and cost it customers and market share to rivals like Infosys (Nasdaq: INFY), IBM (NYSE: IBM), and Accenture (NYSE: ACN). While the scandal is still fresh in many investors' minds, more than a few contrarians look for the beaten-down company to make a serious comeback. The company recently signed a five-year contract with GlaxoSmithKline, and Tech Mahindra, which took over Satyam in April, is bringing its long-term partner BT Group on board.
Many CAPS members anticipate that Mahindra Satyam will be able to regain much of its lost revenue and profits and resume its rapid growth trajectory, with 96% of the 1,205 members rating the stock expecting it to beat the broader market.
Nokia
The world's largest handset maker recently raised concerns among investors when it cut its margins and said it expects market share to remain roughly flat in 2009. But sales and earnings per share grew compared with the first quarter, and the company remains a force to be reckoned with, holding a 41% share of the global smartphone market. It trails the Apple (Nasdaq: AAPL) iPhone and Research In Motion's BlackBerry in the U.S., but shipped more of its N and E series phones worldwide in the latest quarter than those two combined.
Many CAPS members are attracted to Nokia's valuation compared with its peers, with 93% of the 2,652 members rating the Finnish company giving it a thumbs-up.
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