Wall Street's Best Hidden 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

Gulf Resources (Nasdaq: GFRE  )

****

2

19%

Himax Technologies (Nasdaq: HIMX  )

*****

4

13%

Joe's Jeans (Nasdaq: JOEZ  )

****

1

71%

Source: Yahoo! Finance.

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. 

Despite an upward bump in retail same-store sales last month, the ISM's non-manufacturing index showed a big slide in August, giving further credence to the notion the economy will get even worse deeper in the year. Add in that unemployment's higher, factory orders are lower, and productivity fell as labor costs rose, and the news suggests that retailers might just as well kiss a "recovery Christmas" goodbye.

Although the one analyst covering Joe's Jeans expects the premium jean maker to stack up some impressive numbers, luxury-goods retailers might not be the niche to invest in right now. Handbag seller Coach (NYSE: COH  ) has maintained its position during the recession, and it's growing by tapping into international markets that are not yet on Joe's radar. Tiffany (NYSE: TIF  ) , another aspirational brand, saw comps rise 5% last quarter. Similarly, 98% of CAPS members rating the jeans maker believe it will also outperform the broad market averages, but that could just be a relative thing if they fall hard in a new recession.

On the flip side, analysts are expecting Himax Semiconductor to run into static this year, as demand for flat-panel televisions runs into the recession. Growth, they say, has hit a soft spot and even LCD glass producer Corning (NYSE: GLW  ) will see declining sales in the quarters ahead. Like Joe's Jeans, though, the CAPS community is lined up behind Himax, with 98% of the nearly 950 members rating the LCD semi shop to outperform the broad market averages. You can tune in to what's happening on the Himax Technologies CAPS page.

A utility player
Bromine -- a component extracted from natural brine, and typically used for flame retardants, fumigants, and water purification -- currently accounts for around 75% of Gulf Resources' total revenue. That's a nice jump from last year, as average selling prices rose 68% from the year-ago period.

Gulf is one of the largest bromine producers in China; the state issues only six licenses, and the other five holders generally produce bromine for their own use. That pretty much gives Gulf Resources the market all to itself. Although there are bunches of small, unlicensed bromine producers -- China has shut down hundreds of them -- Gulf's strategy is to acquire them to continue growing in size.

Rising prices are showing up in the products using bromide, too. Albemarle (NYSE: ALB  ) , a U.S. based producer, recently announced it was hiking prices on flame retardants, since there's a tight supply market that should allow for increases to go through without too much complaint. Customers will be pretty much happy to get it, regardless of the price.

During the quarter, Gulf Resources continued its acquisition spree, acquiring bromine and crude salt production assets that brings total annual bromine production capacity to 46,300 tonnes and annual crude salt production capacity to 550,000 tonnes.

CAPS member Moorelinn likes that Gulf is debt-free. This puts it in a position of being an acquisition target itself -- ironic, considering its own efforts to consolidate the industry under its roof.

With a market cap of $3.9 billion – 10 times as large as Gulf Resources -- Albemarle would be one of only a few who could consider such a move. Right now, China constitutes only 5% of its revenue, but an acquisition would give it a big jump.

Takeover target or not, head over to the Gulf Resources CAPS page and let us know whether investors will come out ahead, or if they'll have to go pound salt.

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.

Coach is a Motley Fool Stock Advisor selection. The Fool owns shares of Coach. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

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


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Related Tickers

9/2/2014 4:00 PM
ALB $63.92 Up +0.34 +0.53%
Albemarle Corp CAPS Rating: *****
COH $36.75 Down -0.08 -0.22%
Coach CAPS Rating: ****
GLW $20.97 Up +0.11 +0.53%
Corning CAPS Rating: *****
GURE $2.00 Up +0.00 +0.01%
Gulf Resources CAPS Rating: *
HIMX $8.52 Up +0.20 +2.40%
Himax Technologies… CAPS Rating: ****
JOEZ $1.05 Down +0.00 +0.00%
Joe's Jeans, Inc. CAPS Rating: **
TIF $101.68 Up +0.74 +0.73%
Tiffany & Co. CAPS Rating: **

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