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's a handful:
- Curis (Nasdaq: CRIS )
- Luminex (Nasdaq: LMNX )
- Ultrapetrol (Nasdaq: ULTR )
- Unilever (NYSE: UN )
- Voltaire (Nasdaq: VOLT )
Some of these names might surprise you. For example, maybe you're sipping on Unilever's Lipton tea or have protected your hands with Vaseline petroleum jelly. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
Hewlett-Packard (NYSE: HPQ ) , IBM (NYSE: IBM ) , and Silicon Graphics see the potential in Voltaire, a small builder of large data centers that scale horizontally to thousands of servers. Those three companies accounted for 43% of Voltaire's business in 2009, despite its not having once been profitable since its founding in 1997. 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?
Curis is seen as overcoming its underdog status after its colorectal cancer therapy GDC-0449 didn't extend the time it took for the disease to progress or the time until death. Other cancer treatments it's working on still hold promise, and recently Curis received $3 million from Debiopharm as another drug reached a milestone.
While such developments should keep the drug discovery company going, earlier this year CAPS All-Star zzlangerhans really didn't see much to move this stock forward.
I don't foresee any short-term positive catalysts. The share price has doubled from steady state last summer and is approaching the four year high without any justification I can identify. Appropriate valuation given the low probability of eventual success of early stage anti-cancer compounds is about 120M, rather than the 220M they currently sport.
About 96% of the CAPS members rating Curis would disagree, because they've rated it to outperform the broad market averages. In fact, zzlangerhans is the only All-Star to come out against it. Why not head over to the Curis CAPS page and let us know what you think about the drug developer?
On the shoulders of giants
Medical device maker Luminex might not have the same fervor behind it -- "only" 88% of those in CAPs rating it marked it to outperform. But Wall Street has found something to cheer here, as all eight analysts tracking Luminex think it will outperform expectations. A William Blair analyst recently said there seemed to be little downside to the stock, the earnings performance has been strong, and with a new product coming to market, Luminex had a chance to win some significant government bioterrorism contracts.
Analysts expect earnings to grow more than 40% this year and about 83% next year, as revenues steadily grow about 20% annually over the next two years. Why not tell us what's in store on the Luminex CAPS page?
A big opportunity
The recession knocked shipper Ultrapetrol down a peg or two, but its diversified lines of business should help it recover. Although the name makes it sound like it transports oil and petroleum products (it does), Ultrapetrol also provides marine transportation services for grains, forest products, and minerals.
As a matter of fact, South America's robust soybean harvest earlier this year helped boost Ultrapetrol to adjusted earnings gains even as revenues declined slightly from the year-ago period. CAPS member parlin56 pointed to these bumper crops as the catalyst for growth.
With agriculture crops having banner years in South America and the contract with Petro Brasil this company will outperform in the next year.
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.
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