Hidden Stocks for High Returns

Like the song says, investors are looking for stocks to love in all the wrong places. They'll pile into the momentum stocks everyone else buys, but ignore lesser-known opportunities for fear of straying from the crowd.

Yet the search for undiscovered jewels has informed many of our Motley Fool Hidden Gems picks, from Guess? to Infinera. Overlooked by Wall Street and Main Street, and thus undervalued, these stocks hold the best potential to deliver outsized returns.

The Motley Fool CAPS community knows a bargain when it sees one. Below, you'll find several under-the-radar stocks that brim with promise. These companies have garnered 100 or fewer active recommendations on CAPS, though some in the community think they still have outsized potential.

Stock

CAPS Rating (out of 5)

Number of Active Picks

Estimated EPS Growth Next Year

eMagin (AMEX: EMAN  )

*****

13

NA

Local.com (Nasdaq: LOCM  )

****

70

9%

Peregrine Pharmaceuticals (Nasdaq: PPHM  )

****

66

17%

Source: Motley Fool CAPS; NA = not available.

Naturally, we want you to look a bit closer at these stocks before buying. Maybe investors are staying away from these stocks for a reason, so make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Under the radar
Smaller's been better than larger when it comes to organic light emitting diode (OLED) screens. The proliferation of smartphones is driving growth because the phones incorporate the screens into their displays, and that has helped Universal Display (Nasdaq: PANL  ) shares gain 140% over the past year. Televisions featuring the technology will only be coming to market next year and might not gain complete consumer acceptance for several more.

If the small screen is king, then keep an eye on eMagin, a growing manufacturer of OLED microdisplays increasingly used for military purposes. CAPS member WhoCalcuttatwitt points to its supplying ITT with the OLED technology for its night-vision goggles as a key. The contract has a potential value of $15 million to eMagin, but that's just one of a number of defense contracts it has signed.

With only a baker's dozen of CAPS members rating it, eMagin's low profile means there's plenty of opportunity to still profit from its success. BluHrseshoo12 thinks that a management team that includes the former head of Eastman Kodak's (NYSE: EK  ) OLED team -- the one growing segment that company had before selling it off -- is a winner.

eMagin is the industry leader in semi-conductors. They have absolutely zero debt. Return on Equity is high. This is obviously important for a company that isn't paying dividends. The leadership at eMagin is great. Andrew Sculley used to head the OLED department at Kodak. I bought EMAN at 3.06 back when it wasn't available to rate. Now that they have new equipment being built to match production with demand, I don't see their growth slowing down anytime soon.

Searching for a clue
With Google's $6 billion bouquet of roses being spurned by Groupon, some investors are wondering whether Google has its eye on Local.com, or if some other player will be interested.

LivingSocial and BuywithMe are two of the names that surface when discussing the lookalikes Google might be pondering, and SuperMedia has cropped up, too. But investor interest in Local.com has shaken things up a bit, and its shares are 75% higher than they were a month ago.

Of the CAPS members rating Local.com, 94% think it has significant value, so why not add it to the Fool's free portfolio tracker. Then head over to the Local.com CAPS page and search the comments of your fellow Fools for greater insight.

Hope in treating cancer
Targeting brain cancer, Peregrine Pharmaceuticals recently reported that its experimental drug cotara helped patients live three-and-a-half times longer than if they had gone untreated, and some patients went on to live for nearly a decade more. The positive mid-stage trials are encouraging and the therapy is being researched for possible combinations with other drugs.

Assuming cotara makes it over the many hurdles still before it, the road to success may still not be smooth. Analysts point out that Spectrum Pharmaceuticals (Nasdaq: SPPI  ) has had a hard time getting appropriate reimbursements for the drug Zevalin, which treats non-Hodgkin's lymphoma.

In addition to cotara, Peregrine has bavituximab under development to treat non-small cell lung cancer, liver cancer, breast cancer, hepatitis C virus, and HIV. CAPS member joetoken thinks that drug candidate is worth a wager.

Their Bav drug is looking good in Phase II, worth rolling the dice for a few bucks, if it hits, this company goes huge, if not it could bust, so huge risk, with possible big upside

Add Peregrine to the Fool's free portfolio tracker to keep on top of all the news and analysis about its potential.

Keep a high profile
These stocks hold a lot of promise, but also draw equally persuasive arguments for swearing them off. It's why you need to look beneath the headlines and press releases to get a better picture of where your money is going.

Also check into Motley Fool CAPS and tell us whether these low-profile stocks are on their way to higher returns.

Google and ITT are Motley Fool Inside Value picks. Google and Universal Display are Motley Fool Rule Breakers recommendations. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

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


Read/Post Comments (5) | Recommend This Article (12)

Comments from our Foolish Readers

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 December 23, 2010, at 9:08 AM, rkumar02 wrote:

    Rich looks like another good RB bet on OLED . How would you compare with PANL in terms of competition and IP positioning..

  • Report this Comment On December 24, 2010, at 10:50 AM, TMFCop wrote:

    rkumar02,

    PANL's certainly in a leading position here, and while EMAN is gaining more government contracts, Universal Display isn't ceding the field to them. They have some pretty cool wrist displays undergoing testing that was part of a $1 million contract awarded last year.

    This is likely going to be one of those areas where there is plenty of room for growth for multiple players. eMagin is certainly one to keep an eye on, and I probably wouldn't be selling PANL if I owned it. There's still so much open ground here.

    Rich

    Rich

  • Report this Comment On January 05, 2011, at 12:55 PM, sufferingproust wrote:

    I'm going to have to aree here the estimates predict over a 1 billion dollar market by 2015 just in display related OLED products alone.

  • Report this Comment On February 08, 2011, at 4:24 PM, Sultanhigh wrote:

    I'm not sure how you can suggest a stock such as local.com when there are a few message boards complaining of their sales tactics and their far-from-secure way of booking revenue. Billing company's phone bills after they don't cancel a "free" membership. Glad I did one of my favorite screens after following yp.net a few years ago -- company name plus the "word" scam. I do own shares of EMAN, but after having that company grouped with local.com, it's made me reassess my analysis. I know this was written more than a month ago, but still ...

  • Report this Comment On February 08, 2011, at 7:45 PM, jessmeek wrote:

    Peregrine Pharmaceuticals had some interesting stock buyers recently.

    BlackRock Inc. 40 East 52nd Street New York, NY 10022

    3,597,861 shares

    Percent of class 5.63%

    Kenneth Dart

    3,961,568

    Percent of class 7.1%

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1408551, ~/Articles/ArticleHandler.aspx, 12/20/2014 1:44:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement