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 a handful of four-star companies approaching greatness:
- InterDigital (Nasdaq: IDCC )
- Mosaic (NYSE: MOS )
- Take-Two Interactive Software (Nasdaq: TTWO )
- TASER (Nasdaq: TASR )
- Western Refining (NYSE: WNR )
Some of these names might surprise you. For example, InterDigital has the backing of both AT&T (NYSE: T ) and Verizon in the battle for supremacy between long-term evolution (4G wireless broadband), and WiMax backer Alvarion. Take-Two Interactive Software is also in a battle for the hearts and mind share of gamers. It's hoping that Red Dead Redemption, which was released recently with great fanfare, can reignite the fire first lit by the likes of the Grand Theft Auto franchise.
Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, the 165,000-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?
Monsanto (NYSE: MON ) may be having trouble rounding up sales for its Roundup herbicide, but Mosaic and Agrium have fallen hard, too, as fears of a double-dip recession hit chemicals and fertilizer stocks. In the past week alone, PotashCorp and Mosaic have dropped more than 10%.
Mosaic is expanding capacity in potash production, and because the segment already provides the bulk of its operating margins, the expansion could help drive down costs, possibly widening margins even more.
Investors are wont to note that farmers increasingly rely on potash to boost crop yields, and CAPS member bartleyrc says Mosaic's depressed price makes it even more attractive.
Almost every farm needs some form of fertilizer and from a technical [analysis] standpoint, its share price is hammered, so now is a good time to start dollar-cost averaging into this stock.
On the shoulders of giants
Demand isn't necessarily an issue for TASER; it's delays. The stun- gun maker issued preliminary results this morning that are sure to concern investors: Management anticipates second-quarter revenues will be $18.5 million, well below the $25.3 million analysts had forecast, because several large international orders are being pushed back. Domestic sales slumped a bit, too, as government money for local communities for law enforcement needs also declined.
Yet those international orders should still be filled, even if it later in the year. The action the market takes today in response to the announcement, though, may just push the stock down far enough to make it attractively priced relative to the company's growth prospects.
CAPS member ashishkm was pretty prescient yesterday when he suggested shouldn't could on government spending to prop TASER up.
Taser's growth is largely dependent upon government spending at local levels. Given the macro economic conditions, globally speaking, such discretionary spending is fairly limited for some time to come
A big opportunity
Those recessionary fears affecting Mosaic are also at play with Western Refining. In difficult times, you want to invest in companies that have financial flexibility. CAPS member stockpickeraz says that with only $25 million in cash and more than $1 billion in long-term debt on its balance sheet, Western Refining isn't going to have much maneuverability.
Yet 96% of the more than 1,200 CAPS members rating the refinery believe it will still go on to outperform the broad market averages. Let us know your thoughts on the Western Refining CAPS page.
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.
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