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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 are a handful.
- China Life Insurance (NYSE: LFC )
- Kinross Gold (NYSE: KGC )
- Massey Energy (NYSE: MEE )
- Tower Semiconductor (Nasdaq: TSEM )
- Yanzhou Coal Mining (NYSE: YZC )
Some of these names might surprise you. Coal miner Massey Energy, for example, has been running back up after its disastrous mine explosion earlier this year, even as ArcelorMittal (NYSE: MT ) is said to be working on a bid to buy it. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
And Kinross Gold has benefited from rising gold prices: Net income soared to $121 million for the latest quarter compared with just $1.7 million a year ago. And gold could go higher still. Some of 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?
If China Life Insurance has anything going for it, it's the trends moving in its favor. As the country's biggest insurer, with a 40% share of the life insurance market, it will be one of the Chinese companies benefiting from the government's policy of cooling down its overheating economy. Similar to MetLife, American International Group (NYSE: AIG ) , or even Berkshire Hathaway, China Life Insurance generates much of its revenues from interest income, and the move to raise interest rates should improve China Life Insurance's bottom line.
Yet with 1.3 billion people in the country, China Life Insurance only has about 115 million policies, giving it a huge market to go after. Those demographics attract investors, and 960 CAPS members, or 94% of the 1,016 who've rated the company, think the company will go on to outperform the broad market averages.
I agree that the interest rate climate alone will help China Life Insurance profit and I've marked it to outperform. Head over to the China Life Insurance CAPS page and tell us what you think.
Maybe it's that clamping down on expansion that makes CAPS member HmmIn believe that Yanzhou Coal Mining will underperform the market. Last month, shares of the Chinese coal miner popped as the price of coal in the country soared 28% in the latest quarter, but that seems like the type of thing the government is trying to suppress.
Dampening the country's economic appetite might slow the demand side of the equation, which in turn would lead to falling prices. While that may work in the short term, analysts are expecting that prices will rise later on. Demand is just too great. A prominent Chinese think tank expects prices to resume their increase in the first quarter of 2011, when demand for power increases.
Coal in China is used for steelmaking and power generation, both desperately needed there. This is at a point where equities may not fall much further according to contrarians like Marc Faber. This is becoming his near term view, and has been his long term view. Others like Peter Schiff continue to hold it as a long term view. In my opinion, inflation is tightly coiled to occur unexpectedly.
Not sure if Yanzhou Coal is right for you? Add the stock to your watchlist to get all the Foolish news and analysis aggregated for you.
A big opportunity
Maybe the CEO of Tower Semiconductor wasn't so far afield earlier this year when he projected the company's previous revenue growth into big numbers for the future. The specialty image sensor maker reported a 69% jump in sales for the latest quarter and turned a profit for the first time in 10 years. As demand for X-rays, mobile phone cameras, digital cameras, and RF chips has grown, so has Tower Semiconductor.
Operating under the brand name TowerJazz, the company has only a small following in the CAPS community and an even smaller one on Wall Street, which could give it the chance to grow unnoticed for some time. Add your thoughts on the Tower Semiconductor 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.