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. 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 less active recommendations on CAPS, though the community thinks they still have outsized potential.
|
Stock
|
CAPS Rating (out of 5)
|
No. of Active Picks
|
Est. EPS Growth Next Yr.
|
| Oasis Petroleum (NYSE: OAS ) |
*****
|
86
|
69%
|
| Pleuristem Therapeutics (Nasdaq: PSTI ) |
****
|
13
|
40%*
|
| ReachLocal (Nasdaq: RLOC ) |
****
|
70
|
128%**
|
Source: Motley Fool CAPS. * Reduction in expected net loss per share. ** Reflects change from loss of $0.49 per share to expected earnings per share of $0.14.
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.
Blinded by the light
Focusing on the acquisition and development of unconventional oil and natural-gas resources and having recently had its IPO, Oasis Petroleum concentrates its efforts in the important Williston Basin of Montana and North and South Dakota. With Kodiak Oil & Gas (NYSE: KOG ) expanding its presence there last year and Brigham Exploration (Nasdaq: BEXP ) having partnered with U.S. Energy in the area, Oasis ought to be able to find what it's looking for.
Though new, the Bakken shale explorer has developed a strong following with no one thinking it won't be extremely successful. The two dozen All-Star CAPS members and the seven Wall Street analysts all think it will outperform the broad market averages. subsurfacemapper gives voice to view, though now the company has even paid down its long-term debt.
Oasis is a relatively small, focused oil-heavy exploration and production company. They are concentrated in the Bakken play in N Dakota, they have tremendous acreage position and have two recent 1000 plus bpd wells. I believe they will have more, and that should allow them to pay down their high debt load and flourish from there.
While the outlook is unanimous so far, add your own opinion on the Oasis Petroleum CAPS page.
Under the radar
With embryonic stem cells still such a lightning rod for controversy, Pleuristem Therapeutics hopes to sidestep the criticism by using placental stem cells taken from the mother's end of the placenta rather than the fetus's end. Its experimental PLX-PAD stem cell treatment has thus far earned good safety results, and late-stage testing will seek to build on that record.
Neostem (AMEX: NBS ) is also looking to avoid the fallout that would be associated with embryonic stem cells, while still garnering the benefits derived from them, by using adult cells that have embryonic characteristics.
Pleuristem hopes PLX-PAD will be useful in combating critical limb ischemia, a peripheral artery disease that often leads to amputations, even death. With late stage trials to be conducted under protocols for both Europe and the U.S., the stem cell research would be in good regulatory standing if successful.
CAPS member dgoldmeier says cash is always a concern for such companies, but that's a hurdle that could be surmounted if their trials prove fruitful: "needs time and money to develop, but if it is sucsessfull will become a billion + powerhouse."
Keep an eye on how things play out by adding Pleuristem Therapeutics to the Fool's free portfolio tracker.
Divine intervention
It's not that ReachLocal doesn't have a good story to sell, just that it's one that's gotten a lot of page views recently.
Local search and advertising is hot, so while ReachLocal offers a plum opportunity to grab some of the market, the space is getting very crowded. From Groupon to ValueClick, Local.com (Nasdaq: LOCM ) to LivingSocial, everyone want to help you find the best deals in your neighborhood. The Fool's Tim Beyers, though, sees that ReachLocal hasn't gotten the mechanics right just yet, as returns on capital are negative and deteriorating.
On the other hand, the analysts at Motley Fool Rule Breakers like its surging revenue growth (up 30% in the latest quarter, ahead of analyst expectations) and think its recent purchase of DealOn -- yet another local deal site -- makes a good fit with its business model.
The CAPS community may not be unanimous in their belief of ReachLocal's ultimate success, but they tilt the odds decidedly in its favor, with 96% of those rating it seeing it contintuing to beat the Street. You can see whether all advertising, like politics, is local by adding the dealmaker to your watchlist.
Keep a high profile
We've had three stocks today that hold a lot of promise that investors want to get behind, but possess equally persuasive arguments for swearing them off. It's why you need to look beneath the headlines and press releases to get a more full 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.
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