Wall Street's Best Unknown Stocks

When asked for the secret of his success, baseball player Wee Willie Keeler replied, "Hit 'em where they ain't." What worked for Willie at the plate applies equally well in investing. 

Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. When Wall Street turns a blind eye, you have a chance to get in before these stocks get discovered -- or rediscovered -- and start taking off. 

Below, we'll check out companies with only a handful of analyst coverage, then pair our list with the opinions of the Motley Fool CAPS community. A stock that garners CAPS' top ratings, but hasn't yet caught analysts' attention, could be your next home run investment. 

Stock

CAPS Rating
(out of 5)

Wall Street Picks

5-Year EPS Growth

AgFeed Industries (Nasdaq: FEED  )

*****

1

30%

United States Oil (NYSE: USO  )

***

3

N/A

Vonage (NYSE: VG  )

*

2

10%

Source: Yahoo! Finance; NA = not available.

Remember, without analyst support, you'll have to do your own scouting to see whether these stocks deserve a spot on your portfolio's roster. Don't just buy or sell them based solely on their appearance here. 

A utility player
One of the common refrains heard these days when looking at Chinese agricultural stocks like AgFeed Industries, China Green Agriculture (NYSE: CGA  ) , or American Dairy (NYSE: ADY  ) is that they're "oversold." On average, shares of these three companies trade nearly 30% below what they did at the start of the year, and AgFeed is down the most, off 35%.

CAPS member Xitopie thinks that at its bargain bin price, AgFeed is a good bet on the growing middle class in China, while dmbsox believes lower hog prices have held back this hog farmer and feed producer. When that situation turns, so will AgFeed. Indeed, in its latest quarterly report, AgFeed's management forecast hog prices to be as much as 12% to 15% higher in the second half of the year. Yet even with a depressed stock and promise of higher prices, I'm wary of an investment here.

AgFeed's customers are in trouble. Low hog prices coupled with higher feed costs has left them unable to pay their bills. The company has been extending credit terms, causing its receivables to balloon. While revenues rose 17% over the past year, receivables have almost doubled. Moreover, AgFeed is burning through cash as a result, despite reporting GAAP profits every quarter. Free cash flow is in freefall and hemorrhaging at an alarming rate.

Until AgFeed can straighten out this mess, I think its stock will remain depressed, and possibly go lower still. Got a different outlook? Head over to the AgFeed Industries CAPS page or let us know what you think in the comments section below.

An oil slick
Ever since a Transocean rig collapsed in an explosion in April, the outlook for oil has only gotten worse. Though we still depend on fossil fuels, the Gulf of Mexico disaster may have altered the dynamic permanently. Maybe not in our habits, but in government policy, and that doesn't bode well for long-term oil prices.

The United States Oil exchange-traded fund is off about 14% this year as the general economy still struggles. The better housing report released earlier this week -- home sales in April were at their highest level since October -- was simply the effect of the first-time homebuyers' tax credit. The jobs report due out Friday may not do much to suggest there will be additional rising demand.

CAPS members, though, remain confident that further out into the future, oil will cost more. Member okycohen says prices have fallen far enough that the risk-reward ratio is skewed in the ETF's favor.

There is very little downside to oil, presently. Prices during this correction have slid far enough, and likely there is less than 10% more on the downside. That is the type of investment I like to make, little on the downside, with great upside potential.

Kicking it higher
iPhone users have been willing to stick with AT&T's (NYSE: T  ) network despite a reputation for dropped calls, sporadic connectivity, and other distractions that make the experience less than optimal. The company might not be so lucky if such spotty service creeps into its VoIP service U-Verse as it tries to steal customers from Vonage. Last week, there were reports of widespread outages because a server crashed, and though AT&T said earlier this year that it had signed up a million customers, the VoIP service doesn't have the same draw as the iPhone, so customers might not stand for such disruptions too long.

Vonage, which has been dealing with customer losses of its own, has at least been able to build on its international calling plans, which have helped drive average monthly fees per subscriber higher.

CAPS member xXRONIN2000Xx writes that the international angle will continue to be Vonage's growth lever, and may be enough to stir up some acquisition interest.

Swing for the fences
When seeking investments where no one else is looking, Motley Fool CAPS is the best place to start your own research. 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 tell us whether these hidden opportunities will help us go one up on Wall Street.

China Green Agriculture is a Motley Fool Global Gains pick. The Fool owns shares of China Green Agriculture. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (9)

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: 1199605, ~/Articles/ArticleHandler.aspx, 10/31/2014 10:31:03 AM

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