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
|
|
Dynegy (NYSE: DYN )
|
****
|
5
|
4%
|
|
National Bank of Greece (NYSE: NBG )
|
****
|
3
|
(13%)
|
|
Western Refining (NYSE: WNR )
|
****
|
5
|
50%
|
Source: Yahoo! Finance and Motley Fool CAPS.
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
It's been a steep path downhill for Dynegy, which has been in a tailspin, losing three-quarters of its value over the past year and continuing to head lower. With it so dependent on expanding demand for electricity, the picture of an economy in decline hasn't helped. The Fed's fears of a double-dip recession come as jobless claims mount, factory orders fall, and personal spending contracts.
In the face of such doom and gloom, Blackstone Group (NYSE: BX ) has stepped into the maw to save Dynegy by offering to buy the utility for $4.7 billion, or $4.50 a share, a 62% premium over yesterday's closing price. But Blackstone will cut its costs by selling four of Dynegy's natural-gas fired assets to NRG Energy (NYSE: NRG ) for $1.4 billion.
Just yesterday, CAPS member jsGreenmachine said Dynegy's stock price was too low to ignore, which Blackstone apparently agreed with.
Long a dog in the power industry. After failed reverse split, stock is at multi-year low. Recently sold off some assets to reduce debt and add flexibility. Cheap assets. cheap stock price. Too low to ignore.
All fun and games
Didn't we clear up this mess last month? Eurozone banks stepped over a very low hurdle set for them by European central bankers. Virtually all banks, including National Bank of Greece, passed the very un-stressful stress tests and everyone rejoiced. The EU bailed out Greece, markets soared, the euro climbed out of the depths it had plunged into, and we were able to go on with happy thoughts of a recovery.
Except not everyone thought it was such a good idea. Slovakia's new government decided to bailout of the Greek bailout, saying it was unfair for poorer countries to finance richer ones. But if one country is allowed to renege on its obligations, then what's to stop others? Suddenly we're thinking about the PIIGS impact on the world economy again. Even though Bank of Ireland (NYSE: IRE ) wants to pay off its debts within three years, its country's "fiscal credibility" is in tatters, according to Ireland's central banker. Spain has been shut out of the public bond markets, and Greece's economy continued its withering decline.
Certainly Germany's monster GDP growth -- the largest since reunification -- isn't going to make other, poorer European nations any happier. But the Fool thinks that as long as Greece doesn't default on its loans, National Bank of Greece could be a winning investment in the years to come.
CAPS member SuperStar86 had similar thoughts prior to the Motley Fool recommendation:
The sentiment on NBG is too bearish, they are a solid bank in a bad country. As long as Greece avoids bankruptcy, the people of Greece will continue to have faith in NBG which will keep the deposit base solid. This stock should hit 4.50 by the end of 2010.
Kicking it higher
Western Refining posted overall better refining margins from the year-ago period, but a big hit on the East Coast, where margins collapsed 66%, dragged performance below expectations. As a result, it's going to suspend operations at the refinery, though it will keep open its products terminal while supplying the region with finished products. Fortunately for Tesoro (NYSE: TSO ) , it focuses on the western region of the country and was able to return to profitability in the second quarter. Still, we are driving out of peak demand season, so refiners in general might find the landscape not much better for the immediate future.
CAPS All-Star EggplantWizard thinks that's just too much risk for Western:
I was quite bullish on this company, but with the closure of the Yorktown refinery, they have all their eggs in one refining basket, significant term and revolving debt with impaired ability to generate new profitability as margins improve in the refining industry.
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 stock opportunities will help us go one up on Wall Street.
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