4 Stocks You Need to Know

How did Warren Buffett become one of the best investors who's ever lived? Even though he has often downplayed the importance of a stratospheric IQ when it comes to investing, Buffett is one smart cookie. I'm sure he's also had a bit of luck along the way.

But one thing that's always jumped out at me is the man's work ethic, and his extreme dedication to investing. Case in point: In his early years, Buffett claims, he found opportunities by scouring the entire catalogue of publicly traded companies.

Not surprisingly, when asked how individual investors can score the juiciest returns, Buffett has suggested taking the same nose-to-the-grindstone approach. And that's exactly what I've started to do.

Continuing that herculean effort, here are the next four stocks on the list.

Company

Industry

Market Cap

Price-to-Earnings Ratio

Debt-to-Equity Ratio

Return on Equity

LocatePlus Holdings

Internet software and services

$5.2 million

NM

NM

NM

China VoIP & Digital Telecom

Telecom services

$23.8 million

NM

NM

NM

Nufarm

Fertilizers and agricultural chemicals

$1.7 billion

26.2

62.7%

5.4%

Caterpillar (NYSE: CAT  )

Machinery

$37.1 billion

41.5

363.2%

12.1%

Source: Capital IQ, a Standard & Poor's company. NM = not meaningful.

Now that we've laid out some of the stats, let's take a closer look to figure out which companies are worth our time, and which we can kick to the curb.

The rest
LocatePlus
Google (Nasdaq: GOOG  ) recently caused some privacy-concern buzz over gaffes with its new Buzz product, but the big G has nothing on LocatePlus when it comes to acting like Big Brother. LocatePlus' website provides personal information such as dates of birth, driver's license numbers, and Social Security numbers for law enforcement, private investigators, insurance companies, and large corporations.

Unfortunately for interested investors, the company is a pretty big train wreck. It has produced positive cash flow only one out of the past five years, and it hasn't been profitable any of those years. In the company's most recent 10-K filing, LocatePlus' auditors expressed doubts about the company's ability to continue as a going concern.

China VoIP & Digital Telecom
Like the U.S.'s Vonage (NYSE: VG  ) , China VoIP offers voice over Internet protocol phone service. However, China VoIP concentrates primarily on the business community. China VoIP also isn't quite as focused as Vonage, and it has its fingers in other pies -- including virtualization, where it has a partnership with VMware (NYSE: VMW  ) .

Unfortunately, both companies look very similar on the bottom line, with a mutually poor record of reporting any sort of profits. China VoIP has also seen its debt climb significantly in recent years. I think we can safely pass on this one.

The best
Nufarm
Look no further than Monsanto (NYSE: MON  ) and PotashCorp (NYSE: POT  ) to see how successful a company serving the agricultural sector can be. But should Australia's Nufarm be lumped with those particularly successful companies?

I'm not quite convinced that Nufarm is the next Monsanto. However, I think it's a company -- and a stock -- that investors may want to keep an eye on. Historically, Nufarm has produced solid returns on equity while managing to post reasonable growth. Recently, though, company missteps and economic conditions have hurt the bottom line and made the company's debt situation look worrisome. Meanwhile, an abandoned takeover attempt by China's Sinochem created an extra distraction.

The tough times may have created an opportunity for investors, though. Management is confident that profit margins will rebound in 2010, and that the company won't run afoul of its debt covenants. Meanwhile, Sumitomo Chemical recently paid AU$14 per share for 20% of Nufarm -- a 60% premium to where shares are trading today. The company's current trading multiples also suggest that the stock could be undervalued today.

U.S. investors will have to venture to the pink sheets to find Nufarm, but that trip may be worth it.

Caterpillar
Most U.S. investors don't need much of an introduction to heavy-machinery giant Caterpillar. Cat faces tough competition from the likes of Deere (NYSE: DE  ) and others, but its brand and huge global presence give it an edge over most of the companies that try to stack up.

The biggest question for investors, though, may be whether the company's stock is attractive at today's prices. After rebounding in a big way from last year's lows, I'm not convinced that today's price is all that much of a bargain.

However, I do think Cat is the kind of company worth keeping on a watch list, in case the stock does fall to a more attractive price.

We've now knocked another four off the list, but we still have 12,623 companies left to go. Be sure to stay tuned for the next installment!

Don't think you've found your next big winner here? Fool Austin Edwards thinks he may have found it for you.

Monsanto is a Motley Fool Inside Value choice. Google and VMware are Motley Fool Rule Breakers selections. Try any of our Foolish newsletters services free for 30 days

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy has never once been caught with its pants down. Of course, it doesn't actually wear pants ...


Read/Post Comments (0) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1136967, ~/Articles/ArticleHandler.aspx, 8/22/2014 11:56:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement