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 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 firms approaching greatness. Here are a handful:
- Art Technology Group (Nasdaq: ARTG )
- Bank of Ireland (NYSE: IRE )
- Chimera Investment (NYSE: CIM )
- Lions Gate Entertainment (NYSE: LGF )
- TD Ameritrade (Nasdaq: AMTD )
Some of these names might surprise you. For example, TD Ameritrade has been a top discount broker that found itself a more financially secure rival to E*Trade Financial (Nasdaq: ETFC ) . Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
Bank of Ireland has been mired in the financial crisis that's swept over Europe, but with the country's "bad bank" set to accept bad loans for it and Allied Irish Bank (NYSE: AIB ) , CAPS All-Star member Teacherman1 figures the stage is set for a long-term recovery. The investor intelligence community apparently agrees, as almost 94% of the nearly 800 CAPS members who rated the bank have said it will outperform the broad market averages.
However, the 160,000-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?
Though the company has shown its ability to generate some serious cash, billionaire investor Carl Icahn wants to make sure Lions Gate Entertainment doesn't over-leverage itself by squandering the money on an expensive acquisition of the MGM movie studio.
As a result, although he expressed an interest in raising his ownership stake to as much as 22%, Icahn now says he's willing to buy the entire company for $6 a share, the same price he offered to raise his stake in the filmmaker. It represented a 23% premium to where the stock had been trading at the time, but management rejected the offer as too low.
With the box office success of young adult book series to movies, Lions Gate could have stumbled upon a series (Ed. - The Hunger Games ) that propels them beyond niche targeted movies. The success of Precious, buying interest from Icahn, and acquisition speculation is also helping the stock price of late.
On the shoulders of giants
It was back in December that Chimera Investment was identified as a stock ready to run as it took advantage of the plethora of distressed real-estate assets and mortgages on the market. The confidence investors showed in Chimera looks to be paying off as the REIT maintained its $0.17-per-share dividend, giving it a yield of 16.8%. cjensen81 says collecting that payment while waiting for the commercial real estate market to bloom again will be worth his while:
Once the economy picks back up commercial and residential real estate will follow. We will not see this until the banks are in better shape following with the rise in oil prices. Meanwhile I will sit and wait reinvesting my heavy dividend over the next couple of years till this baby blossoms.
A big opportunity
E-commerce remains a potent force, as a certain e-tailer's strength over the Christmas season clearly highlighted. That represents a big opportunity for companies that assist businesses with their own online presence, such as Art Technology Group. CAPS member Subida says the consistent growth the behind-the-scenes tech provider has produced over the past few years means it's up to the challenge of taking on bigger rivals like industry leader Digital River:
Here's an impressive fact. In all four quarters for the past 6 years, Art Tech has grown revenue Q over Q from previous year. In other words we are looking at 30 data points here there are all spot-on and beautiful. For what it's worth, CAPS thinks highly of it, as do the pros. Like most of my spec plays, ARTG has absolutely no long term debt, and enough liquid assets to cover all liabilities in a pinch.
A great opportunity for you
Investor sentiment suggests these four-star investments 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.