5 Stocks Approaching Greatness

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 approaching greatness. Here are a handful of them.

  • 8x8 (Nasdaq: EGHT  )
  • General Electric (NYSE: GE  )
  • Integrated Silicon Solution (Nasdaq: ISSI  )
  • JA Solar (Nasdaq: JASO  )
  • MELA Sciences (Nasdaq: MELA  )

Some of these names might surprise you. For example, superconglomerate General Electric has been an industry leader in consumer goods, health care, and now alternative energy. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.

The company 8x8 has been lost in the glare of the media spotlight regularly focused on rival VoIP providers Skype and Vonage (NYSE: VG  ) . Yet 8x8's management sees a lot of opportunity available to it, and with its share price so low, has decided to up the number of shares it's repurchasing by 50%, from $2 million worth to $3 million. It regularly buys back its shares, but will now do so even more frequently. However, the 170,000-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?
Consumer sentiment remains in a state of flux. There are overwhelming signs that the economy is heading for more than just a slight setback and will actually contract, but cracks in the wall continue to appear, giving investors hope. Circuit maker Integrated Silicon Solution believes recent results coupled with a growing backlog of business means the fears of a double-dip recession are overblown.

The circuit maker for consumer electronics, network devices, and mobile communications reported record revenues in the third quarter that ended in July, with top-line results soaring 25% over the year-ago period. Also, the backlog for the current quarter is the highest it has had in years, allowing management to boost earnings guidance to a range of $0.42 to $0.52 a share. While that's a pretty broad target, it was enough for analysts to raise their own estimates by more than 10%, with the consensus coming in at $0.49 a share.

It would seem that with 88% of the CAPS members rating the circuit maker picking it to outperform the broad market averages, more than a few are putting it on their My Watchlist feature, allowing them to find all the Foolish news and analysis about the company. You can do the same while also adding your own opinion to the Integrated Silicon Solution CAPS page or in the comments section below.

On the shoulders of giants
Shares of MELA Sciences broke down earlier this year when the Food and Drug Administration postponed making a decision on its skin-cancer screening device because it needed more data on the novel approach it offers.

The device emits light waves to capture images of suspected lesions and uses a sophisticated algorithm trained on MELA's database to analyze the images and determine whether a biopsy is needed. It's a radical departure from the methods employed by industry giants like General Electric or Siemens, whose PET/CT scanners need an individual to pore over the images and make the determination.

If it was a hit-or-miss outcome on reading the results, the MELA device wouldn't have such a strong backing, but CAPS member JonPon says the pinpoint accuracy of it makes it a sure thing.

With the accuracy of the MELAFind device being statistically significant in comparison with dermatologists and with it's non-invasive nature it is sure to be a winning device.

A big opportunity
Ignoring the bearish calls of one analyst, who expressed doubt that Chinese solar cell shops are really sold out on their inventory as they claim, the market boosted the shares of JA Solar after it reported orders from various customers totaling 500 megawatts and secured $4.4 billion in credit from China Development Bank. Previously it signed an agreement with MEMC Electronic Materials (NYSE: WFR  ) for high-performance solar modules through 2012.

JA Solar, which claims it is the world's largest pure-play solar cell shop, has alleviated a lot of the fear that gripped the market regarding solar demand. With governments around the globe slashing their feed-in tariffs to subsidize costs, it was feared that business would evaporate with it. From JA Solar's perspective, next year will be a pivotal year in growth.

CAPS member SydParrot, who previously thought the run-up in the stock price might be a signal to sell, now says it's just a way station on the road to even loftier heights.

Just went over the numbers, thinking I might sell (real world) after the 10% bump today. But: Translate their 1.35GW guidance for this year into Q3 and Q4 earnings, and they are worth closer to $15 than $10 by February. Throw in that enormous new contract for 2011 and a great new module due out this year, I bet they hit a new high within two years. That's a triple or better at $7 and change.

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.

The Fool owns shares of MELA Sciences. 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. The Motley Fool has a disclosure policy.

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.


Read/Post Comments (4) | Recommend This Article (10)

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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.

  • Report this Comment On September 17, 2010, at 7:59 PM, kdt34wqx wrote:

    Greatness? At $16 per share, GE has lost $488 billion of shareholder’s equity since 1999 (74% of its value), including $276 billion (62%) since its collapse in 2007. GE has also lost $39 billion of shareholder’s value (about 19%) since its high of $19.70 in April of 2010. That’s the GE idea of greatness.

  • Report this Comment On September 18, 2010, at 9:14 AM, kdt34wqx wrote:

    The "conglomerate" business model went out of favor in the sixties as being unproductive. GE should be broken up and sold off piece by piece as a way to create shareholder value. This would have the added benefit of getting rid of the present GE management. There are plenty of good managers out there who can run businesses successfully. They just don't work for GE.

  • Report this Comment On October 07, 2010, at 3:26 PM, jrusso9722 wrote:

    MELA, PANL, GENT, all up on 10-7-10. Headed to stardom. Each solves a serious problem. I lost $82K on Lucent, ALU, in my 401k. I hope to make up most or all of it, with these 3. Regards, Joe

  • Report this Comment On November 04, 2010, at 7:23 AM, jrusso9722 wrote:

    Good Morning.

    Melanoma is such a serious illness. MELAfind is so important to catching the disease early, at it's most curable time. MelaFind offers the doctor a standard, which along with opinion, will preserve and protect life. Just like x-ray, CAT scan, MRI, aid in diagnosis, MelaFind will be valuable in saving life.

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