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 5,400 rated companies, but they're just shy of superstardom. While all the attention might be focused on five-star companies, we can sift through CAPS to find four-star ones that might be approaching greatness. Here are a handful:
- Eagle Bulk Shipping (Nasdaq: EGLE )
- FUQI International (Nasdaq: FUQI )
- Isis Pharmaceuticals (Nasdaq: ISIS )
- OmniVision Technologies (Nasdaq: OVTI )
- Taseko Mines (NYSE: TGB )
Some of these names might surprise you. For example, Eagle Bulk Shipping has benefited from having nearly half its fleet exposed to the spot market this year, meaning it has the opportunity to earn more profit as industry conditions improve and rates rise. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
FUQI International's jewelry appeals to China's growing middle class, making CAPS member MeasuredApproach take notice. And the cash hoard on Isis Pharmaceuticals' balance sheet makes zzlangerhans cautiously optimistic about it surviving Food and Drug Administration reviews.
However, some of the 150,000-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 firmly believe that global fiscal crises won't ebb anytime soon, thereby propping up prices of commodities -- particularly gold. So the slight pullback in price for Taseko Mines recently, after its inexorable rise from penny stock in 2008 to knocking on the doors of mid-tier miners, is a welcome excuse to buy some shares.
Foolish gold guru Christopher Barker puts the potential for Taseko's operating margin on the same level (if not ahead of) that of Goldcorp (NYSE: GG ) and Yamana, and marvels at Taseko's ability to generate an estimated production cost of negative $330 per ounce of gold from its Prosperity mine once all the copper byproducts are calculated in. It's why he says Taseko has mapped out a future that's paved with gold -- but the miner trades at 10% lower than when he wrote that.
CAPS member DarthMaul09 suggests it's only going to take Taseko a short time to clarify its expansion plans before the markets warm up to it again.
The exciting hype drove the stock price way up, but recently it has been in a relatively narrow trading range. Once the company gets further along in its expansion process, the potential increase in revenue will become more real to investors, which will likely be reflected in the steady rise of the stock price.
About 97% of the CAPS members rating the gold miner say it will outperform the market. Add your opinion on the Taseko Mines CAPS page.
On the shoulders of giants
OmniVision Technologies didn't need the rumor of a massive order from Apple (Nasdaq: AAPL ) for its CMOS image sensors to move from an $18 million loss a year ago to a $5 million profit for the latest quarter. It handily beat analyst expectations and, should the Apple rumors prove true, it would serve as notice to those who thought OmniVision's guidance was lackluster because it only matched forecasts.
Analysts are warming up to the chip maker's potential, and note that recent design wins at two unidentified smartphone makers ought to help it steal market share from competitors. Let's hope one really isn't Palm, as is rumored, considering its recent poor performance and notation that carriers have stepped on the brakes of new orders of the Pre and Pixie.
Back in January, CAPS member ovtrider forecasted that things were looking up for OmniVision.
Earnings will be surprisingly strong due to iPhone demand; should be back to >$15, then taper off to ~$10 before the next run.
Seems all we need to do now is wait for the pullback. With 94% of CAPS members agreeing that the sensor maker will continue to outperform the market, is there anyone out there who thinks it will disappoint? Let us know on the OmniVision Technologies CAPS page or in the comments section below.
A great opportunity for you
Some investors suggest these four-star companies still seem to be on their way to five-star greatness, but 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.
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