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 St. Picks
|
Est. EPS Growth Next Year
|
| China Natural Gas (Nasdaq: CHNG ) |
****
|
3
|
NA
|
| General Steel Holdings (NYSE: GSI ) |
*****
|
4
|
NA
|
| Jamba (Nasdaq: JMBA ) |
****
|
5
|
182%
|
Source: Yahoo! Finance; Motley Fool CAPS; NA = not available.
Remember, without much 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.
Hiding in plain sight
China Natural Gas hasn't yet recovered from the beating it took for failing to disclose that it was in violation of loan covenants. Defaulting on those agreements forced the company to restate its financials. Like Clean Energy Fuels (Nasdaq: CLNE ) here at home, the Chinese natural gas player is building a series of alternative fuel filling stations in its home country.
If you want to invest in nat gas in China, some Fools find Ivanhoe Energy (Nasdaq: IVAN ) , a better bet. In addition to its Chinese facilities, it's developing two large oil and gas projects, one in Ecuador and the other in Canada.
Yet with 97% of the nearly 1,600 CAPS members rating the natural gas play to outperform the broad market averages, it's fairly obvious that they think it will overcome the market's doubts and churn out index-beating results.
Let us know on the China Natural Gas CAPS page whether you think its stock will exhibit lighter-than-air properties again.
All hot and bothered
Shares of another Chinese company, steelmaker General Steel Holdings, also got bent out of shape in recent months, even after posting a fourth-quarter profit on the strength of higher revenue. While that mostly owed to higher prices, General Steel says it expects to see greater demand in 2011 in the infrastructure, housing, and transportation sectors.
Yet even though China continues to expand, massive government cash infusions drive much of that growth. A recent Australian news expose on the country's housing situation, for example, shows an unsustainable strategy of overbuilding. Immense "ghost cities" have sprung up across China -- vast expanses of brand new homes, highrises, and massive malls devoid of any people. Worse yet, the building boom continues because of a command economy's need to always grow GDP. It's a bubble beyond anything we've witnessed here in the U.S. When it bursts, steel players in China like General Steel and China Gerui Advanced Materials (Nasdaq: CHOP ) will be deflated, too.
Wall Street remains unanimous in its view that General will outperform the markets. CAPS All-Star members are bullish as well, with 99% of those rating the steel producer giving it the thumbs-up. Roll out your own view on the General Steel CAPS page, then add it to your watchlist if it's still to risky for your real dollars.
In real estate we trust
Smoothie maker Jamba sought to reenergize its business by expanding beyond fruit drinks to offer warm drinks and food. Yet the beverage maker remained unable to turn a profit, and committed the sin of missing analyst expectations. While the stock has moved up this past week, shares are still down 3% for the month, and off almost 20% over the past year. Revenues fell 17%, and sales at company-operated shops tumbled 20%.
But Jamba is a company in transition. Changing to a more franchise-focused model should help it reduce its costs in the future. Deals like the one it inked with Nestle certainly won't hurt, but taking on Starbucks and Hansen Natural (Nasdaq: HANS ) won't be an easy task.
CAPS member kevhead64 hopes that warmer weather -- will it ever really get here? -- will juice sales for Jamba:
Summer time = more sales. Q2 and Q3 should be ok.. Six month play selling into Q3 earnings.. Then run and hide till next year and make same play
Add the juice joint to the Fool's free portfolio tracker, and get all our Foolish news and analysis about it aggregated for you in one place.
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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