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 their five-star peers, we can sift through CAPS to find four-star companies that might be approaching greatness. Here are a handful of them:
- MELA Sciences (Nasdaq: MELA )
- Jamba (Nasdaq: JMBA )
- Joe's Jeans (Nasdaq: JOEZ )
- Zix (Nasdaq: ZIXI )
Some of these names might surprise you. For example, Chinese oil giant CNOOC is buying up oil assets all around the globe to satisfy that country's appetite. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
A little over a week ago, MELA Sciences (the new name for Electro-Optical Sciences) seemed like it was bouncing back. Its handheld MelaFind device for discovering melanomas dramatically changes the way these cancerous growths are found, compared with the PET/CT scanners made by General Electric (NYSE: GE ) and Siemens.
Thus, the 200 CAPS members who rated the medical device maker to outperform the broad market averages were probably shocked to hear that the Food and Drug Administration wants more data on the MelaFind before approving it, pushing its review back by six months.
However, some of 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?
CAPS member TraderHater writes that smoothie drink maker Jamba might capture the investing public's imagination the way Krispy Kreme Doughnuts did. But with the proliferation of its outlets, the company just might come to dominate the niche the way Starbucks (Nasdaq: SBUX ) did. TraderHater writes:
Going out on a limb here... Jamba has a great product that seems fairly priced. Granted, the novelty may have worn off (krispy kreme), but who else makes smoothies? They really should be the starbucks of their market. All they need really is a caffeinated version of their smoothies.
Jamba has reorganized their menu, expanded on colleges and entered the grocery store. A focus on juice products should help. While perhaps a little "high on the fructose" at this level, I'm still juiced up on Jamba over the long term.
On the shoulders of giants
Although Jamba might be a niche, trendy product right now, it's not alone. High-priced, high-fashion jeans for women are nothing new -- True Religion (Nasdaq: TRLG ) has been doing it right for a while now -- but adding men to the mix certainly qualifies. After an earnings report that had investors laughing at Wall Street for underestimating it, Joe's Jeans is making analysts reconsider the possibilities.
Joe's Jeans might be fancy, but like other growing companies that put their jeans on one leg at a time, the company is producing results. It posted a 42% increase in sales to $25.2 million for the fourth quarter, and its gross margins increased to 49%. That's enough for CAPS All-Star Seansonfire to peg it as the next big growth story:
Still relatively cheap here in the low $2 range with 6 new retail stores just announced this looks like the time to get in to JOEZ.
A big opportunity
There was little surprise in Zix's decision to leave the e-prescription business, because it has been conducting a strategic review of the operations for some time now. I'm probably more surprised that it wasn't able to sell it to someone else instead of winding it down over the course of the year. What remains is a relatively healthy email encryption service that has enjoyed some growth as a result of President Obama's stimulus program last year.
This stock is overpriced by a factor of 5! The email encryption market is saturated. Google mail is now encrypted and is free. CSCO, Symantec, ... all have email encryption at a fraction of the cost of zix.
A great opportunity for you
Some investors suggest 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.