5 Stocks Approaching Greatness

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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
On Motley Fool CAPS, these opportunities can be found among our four-star stocks. In CAPS' proprietary ratings system, they rank higher than most of the other 5,200 starred companies, but they're just shy of superstardom. While all the attention might be focused on their five-star peers, we can sift through CAPS to find four-star companies approaching greatness. Here are a handful:

• Agilent Technologies (NYSE: A)
• Cenveo (NYSE: CVO)
• Energy Conversion Devices (Nasdaq: ENER)
• Immucor (Nasdaq: BLUD)
• USG (NYSE: USG)

Some of these names might surprise you. USG has built up a century-long track record of walling in our homes with gypsum board. 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 130,000-plus CAPS members 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?
Some investors who chose to ignore the clouds gathering over the solar industry last year have been burned, with stock prices faltering amid tight credit markets, supply issues, and ambitious growth projections. Although an extension of a tax credit for solar system installations was heralded, there was another challenge for the industry.

First Solar (Nasdaq: FSLR) started it with its report in February, saying that although mid- to long-term prospects for the industry remain bright, more immediate concerns led it to cut pricing, put up cash for joint ventures, and extend terms on payments. Those types of actions eat into margins and hurt investor confidence.

Not long after that, Energy Conversion Devices stumbled, cutting top-line guidance 30% and shutting production for two weeks. It ended up withdrawing the guidance it had issued for the third quarter.

The latest evidence came from MEMC Electronic Materials (NYSE: WFR), whose earnings report was in line with its guidance, which it had lowered. It also suffers along with the semiconductor industry, and German solar company Conergy is breaking its 10-year, $4 billion contract with the wafer maker, indicating a material weakness in industry demand. MEMC Electronic Materials says it can't really tell how much demand will pick up in the near future, so it will suspend guidance.

Energy Conversion Devices shares are trading about 40% below where they were at the start of the year, and there are other ominous signs for the months ahead, but some investors believe the company will benefit from continued investment in solar power projects. CAPS All-Star member TSIF believes the alternative energy company's strong balance sheet and plans for strategic investments, including global expansion and cost reductions, will boost its stock.

Energy Conversion Devices has had a rocky year with huge peaks and valley's in share price. Their current P/E is still a tad high for their 12% margins, but sometimes you have to ride the waves and the alt-energy wave is turning into a tidal wave. The cost of oil no longer impacts the alt-energy world as it becomes a global initiative with government backing. Energy Conversion has seen consistent growth and maintains excellent cash flow. Cash on hand is greater than debt. the last four quarters of profits have been over 15% [quarter to quarter] as it became profitable about a year ago. With ties to both solar and batteries Energy Conversion has twice the chance of hitting it well. Their smaller solar offerings could mushroom as government incentives and price drops make home solar more affordable. Green Up.

A great opportunity for you
These four-star investments seem to be 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.