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
The data shows that stocks achieving five-star ratings on Motley Fool CAPS have outperformed the market by 12 percentage points, and 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 that are perhaps heading toward superstardom. Here are a handful of four-star companies approaching greatness.
- Charles Schwab (Nasdaq: SCHW )
- E*Trade Financial (Nasdaq: ETFC )
- Panacos Pharmaceuticals (Nasdaq: PANC )
- USEC (NYSE: USU )
- Yamana Gold (NYSE: AUY )
Some of these names might surprise you. Charles Schwab, for example, was one of the originators of the discount-brokerage model. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. 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 our attention.
In the sight of greatness
E*Trade was also a revolutionary in offering deep-discount commissions on Internet trading, but lately has stumbled as it tried to become more of a financial services powerhouse. Its shares have fallen almost 80% over the past year, while more focused TD AMERITRADE (Nasdaq: AMTD ) has appreciated more than 20%. CAPS member AlpacaKing, however, finds E*Trade's turnaround plans a welcome tonic:
Under the turnaround plan, E Trade is eliminating Home Equity Loans, reducing risk and improving the brokerage business by targeted advertising, a great platform, and the ability to trade internationally in five different markets. Back office support is very strong and accomodating, and new accounts, assets, and daily trades (Darts) are increasing every month.
In addition, more than 91% of CAPS members casting an opinion think Schwab is the best-of-breed discount brokerage, and that it will outperform the market. Member nysegal figures that once investors begin to return to the market, Chuck will reap the benefit with earnings growing significantly over time. "This is a terrific company that should grow earnings 18% in 08 and 09; earnings should accelerate once economy and investors come back to market; good dividend growth."
With Yamana Gold and rivals like Goldcorp (NYSE: GG ) getting knocked down recently, CAPS member UnitX finds Yamana's reserves and cheap price too tempting to ignore:
The outlook on Gold and Yamana's strong growth plans along with their low cost structure is a great stock to own for the long haul. Their existing mines are rich in reserves and at it's current price, it really makes this stock a difficult one to pass up.
In the aftermath of the conflict between Russia and Georgia, uranium enrichment providers such as USEC are being sought after as the security of uranium supplies becomes a concern. CAPS member jsbalaban thinks USEC's efforts at cost-savings will pay off:
Once the new centrifuges start coming on line, USEC's electric bill of $775M will be reduced by 95% once all the existing govt leased units are phased out. In 2012 we can expect savings of about $225m, which, less the tax deduction, will add considerably to the bottom line.
A great opportunity for you
These four-star investments are on their way to five-star greatness and it pays to start your own research on these stocks on 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.