Some companies are obviously great investments -- in hindsight. Yet for every stock out there screaming "buy me," others simply give us a nudge and a nod. How can we tell tomorrow's obviously great investments from the thousands of pretenders?
The stars' walk of fame
Over its first 20 months of existence, the data shows that stocks achieving five-star ratings on Motley Fool CAPS outperformed the market by 12 percentage points. Newly minted five-star stocks represent your best opportunity to capture those returns. So let's sift through the proprietary ratings system and find those stocks heading toward superstardom. Here are a handful of four-star firms approaching greatness.
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Asta Funding
(NASDAQ:ASFI) -
Canadian Superior Energy
(AMEX:SNG) -
DepoMed
(NASDAQ:DEPO) -
Halliburton
(NYSE:HAL) -
Intercontinental Exchange
(NYSE:ICE)
Some of these names might surprise you. Halliburton, for example, has been one of the leading oil services companies for years. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, the 115,000-plus CAPS investors chose these companies as less obvious sources for tomorrow's great buys so let's see why they might merit your attention.
In the sight of greatness
Asta Funding's purchase of $300 million worth of receivables for collection last year, with a face value of $6.9 billion, was hailed as a landmark acquisition. Motley Fool Hidden Gems recommendation Portfolio Recovery Associates
The debt supposedly had certain properties that would make it easier to collect, but that has proved difficult. When Asta reported earnings last month, it said it had transferred the receivables to the cost recovery method of accounting, which is used when cash flows can't be estimated or loan collection is improbable. Ouch!
As a credit-collection firm, Asta has been knocked back this year, but All-Star CAPS member 7iles feels that too much is too much:
This company has taken a beating this year and is likely to continue to hurt but I think the market has overshot on the downside. Hopefully things won't be as bleak as some think/expect.
Even with the recent volatility in the price of oil and natural gas, the potential for further exploration and drilling can be a boon to Canadian Superior Energy, which believes it has a major find on its hands in the area of Trinidad & Tobago. CAPS member nickbaes thinks the "Bounty" well could be the next major catalyst propelling Canadian Superior forward, despite its seemingly rich valuation:
The 11 times sales appears somewhat frightening. However the Trinidad project should yield a hefty return. The hype surrounding this project has dissipated and the recent dilution has caused some to lose patience and sell.
Oil has fallen off its highs so some of the less known plays have fallen by the wayside.
I am not long many oil producers but I feel this one has a lot of potential....and is acting as a call option on this Trinidad project.
Specialty pharmaceutical DepoMed has been seeking wider distribution of its diabetes treatment Glumzeta. The deal it inked with CVS Caremark
It's been a year since Depomed's stock price got blasted by the failure of Gabapentin GR in a phase III trial for post-herpetic neuropathy. Since then the ProQuin distribution deal has collapsed and the product is no longer mentioned in quarterly statements. Glumetza revenues have been stagnant. And the company is repeating the Gabapentin GR phase III trial hoping to see less improvement in the placebo group. Despite this grim picture, the share price has climbed almost back to where it was prior to the blow up. The odds seem favorable that the stock is headed for another crater.
A great opportunity for you
These four-star investments could be on their way to five-star greatness. It pays to start your own research on them with Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
Sign up today for the completely free service, and let us hear what you have to say about the great and almost-great companies that interest you.
