5 water-cooler stocks worth a look

By The Motley Fool

Whether it's the corporate lunchroom, your cubicle or the local watering hole, there are regular places we gather to discuss news, sports or -- if you're like us -- stocks.

Here at MSN CAPS, we gather around the virtual water cooler each day to rate stocks and delve into their merits as investments.

• MSN CAPS: Tap the wisdom of the investing crowd

Our 115,000-strong CAPS investor community -- where members give the thumbs-up or thumbs-down to more than 5,400 stocks -- has shown a propensity for making prescient market calls.

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.

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Let's look at some of the most-talked-about stocks in the CAPS universe, and what other investors are saying about their likelihood to outperform or underperform the broader market.

Talked-about stocks

Company	Sector	52-week high	CAPS rating	''Outperform" calls
Apple	Technology hardware	$202.96	****	92%
Bank of America	Banking	$48.58	***	86%
Johnson & Johnson	Pharmaceuticals	$72.76	*****	96%
Netflix	Movie rentals	$40.90	***	83%
Sirius XM Radio	Broadcasting	$3.94	**	80%

Apple (AAPL, news, msgs) has done an incredible job of continuing its growth trajectory. The Cupertino, Calif., company on Oct. 21 demonstrated its resilience in the face of the economy's problems when it said net income rose 26% in its fiscal fourth quarter.

During the quarter, the new 3G version of Apple's iPhone outsold the popular BlackBerry from Research In Motion (RIMM, news, msgs). Apple chief Steve Jobs, on a post-earnings conference call with analysts, reiterated the company's plan to create and sell higher-quality, more-expensive products, despite the threat that the deteriorating economy may erode consumers' purchasing power.

I think Apple was smart to avoid the rush to provide "netbooks" -- the sub-$500 notebooks put out by Hewlett-Packard (HPQ, news, msgs), Acer and others and promoted as second or third computers for people looking to check e-mail or browse the Internet on the road.

I think the netbooks' tiny screens, weak battery life and inability to offer the advantages of a full-fledged notebook make them a fad that will probably die out. If you want a cool, small device to surf the Web, buy an iPhone -- you'll get a cell phone thrown in for free.

CAPS All-Star "DemonDoug" thinks Apple is the leader in too many areas to justify the stock's recent slide to a 52-week low of $85 a share.

"52 week low . . . down 17% in one day. . . . Now THIS is some blood-on-the-streets action," he recently wrote. "(PS –- iPhone is still the best phone in the world, and I know too many people that are using Macs. Oh yeah, they also have that iPod thingy.)"

But CAPS All-Star "jgseattle" thinks it's a mistake to assume Apple's growth will be sustained as the economy contracts.

"(The stock) falls into my retail short basket," jgseattle wrote. "Some might think this is a strange pick for that, but so much of (Apple's profit) is iPod, iPhone . . . the consumer is going to pull back and not make those luxe buys."

Too big to fail?

This isn't your mom's banking system anymore, but Bank of America (BAC, news, msgs) remains the nation's biggest bank, with $1.9 trillion in assets. It's going to get a lot bigger, too, once its takeover of Merrill Lynch (MER, news, msgs) goes through. Antitrust regulators have already approved the Charlotte company's $35 billion merger with Merrill, formerly the world's largest investment bank.

Bank of America's ability to avoid the mistakes made by its rivals has allowed it to scoop up some of the country's most important financial assets. As top-rated CAPS All-Star "BuffettBoy2" notes, Bank of America doesn't need a bailout -- it's the one bailing out the failures.

"They have been responsible (compared to others in the financial sector)," BuffettBoy2 recently wrote of Bank of America. "The recession is not fazing them. They will be the winners because they are buying low. They are doing what businesses should strive to do at all times: building market share and increasing future revenue possibility."

So what do you think? Will the iPod maker remain the apple of investors' eyes? Can we take Bank of America's good fortune to the bank?

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.

This article was reported and written by Rich Duprey for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.