Wall Street's Best Hidden Stocks

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 analysts covering them, 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 Security & Surveillance (NYSE: CSR  ) **** 5 17%
General Moly (NYSE: GMO  ) ***** 1 0%
Rentech (NYSE: RTK  ) **** 3 (33%)

Source: Yahoo! Finance; Motley Fool CAPS.

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 buy or sell them based solely on their appearance here. 

Hiding in plain sight
The CEO of China Security & Surveillance made good on his proposal to take the security camera firm private, offering shareholders $6.50 for each of their shares, a 30% premium to where the stock was trading. During a period when Chinese small-cap stocks are getting clobbered by allegations of scandal and fraud, it may be worthwhile to get out while the getting's good.

Other Chinese stocks have been the subject of go-private deals, including Harbin Electric (Nasdaq: HRBN  ) , whose CEO has made several such overtures; China Fire & Security, which got an offer from Bain Capital; and both Funtalk China and Fushin Copperweld (Nasdaq: FSIN  ) .

When everyone looks at you askance, getting out of the public's eye might be a good idea. Yet as fellow Fool Matt Koppenheffer points out, China Security & Surveillance's CEO is stealing the company from shareholders with such a lowball bid. That could be why the stock trades at such a discount to the offered price: Shareholders expect the deal won't go through.

CAPS member AStarSearch thinks the offer might not be as real as first appearances suggest:

Just a hunch: [chairman and CEO Guoshen Tu] is full of dukers and is not going to pay anything to buy the company, book value is bunk because it's all receivables, and fair value is south of $5.

Let us know in the comments section below or on the China Security & Surveillance CAPS page what you think the chances are of the deal falling apart.

Worked into a lather
Whew, now that the market's gotten that rare-earth elements bug out of its system, we can view the stocks that were brought up to such dizzying heights in the cold light of day. Apparently the market has had buyer's remorse, because shares of General Moly are down 43% from their peak, China Shen Zhou Mining (NYSE: SHZ  ) is off 63%, and China GengSheng Minerals is 68% lower. Even Rare Element Resources (NYSE: REE  ) trades 33% below its recent highs.

Of course, many of these stocks aren't in the rare-earth metals business to begin with, despite having been caught up in the euphoria. At best, companies like General Moly and China Shen Zhou have tangential potential as rare-earth plays.

Most of General Moly's hope is based on what could be a very lucrative molybdenum deposit it owns in Nevada, but only if it can get the necessary permits and overcome objections that have been raised. Am I the only one who finds it curious that it was necessary for General Moly to go all the way to China to raise the necessary financing for its Mt. Hope project?

While it won't be until the middle of the decade that General Moly is able to extract anything from the ground, CAPS member ryansal believes that when that time comes, it will rival Molycorp as an investment: "Once this company actually pulls anything from the ground, and having one of the largest sites, it could be another MCP???"

Give us your opinion on the General Moly CAPS page or add the stock to your watchlist to see if this is truly a rare opportunity.

Shallow pockets
There was only so much money to go around, and alternative fuels developer Rentech didn't make the cut of companies the Energy Department was willing to finance this time around. With its biomass gassifier plant hanging in the balance on receipt of those funds, investors pummeled the stock on the news of the rejection.

Rentech has other projects it's moving forward on, so it's not like it will be going out of business tomorrow, but it had been a key growth driver and now the catalyst for the stock isn't there. But 89% of the 386 CAPS members rating Rentech think the alt fuels maker still has the wherewithal to outperform the broad market averages. But it might be better to simply add it to the Fool's free portfolio tracker to stay on top of all the news as it develops.

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.

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 this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (5)

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 May 24, 2011, at 7:28 PM, Medicalrecordman wrote:

    These deals won't go through and neither will the most recent B.S. offer from CFSG.

  • Report this Comment On May 26, 2011, at 10:02 AM, cstash wrote:

    Rich Duprey:

    I don't understand what you are saying, (During a period when Chinese small-cap stocks are getting clobbered by allegations of scandal and fraud, it may be worthwhile to get out while the getting's good). Are you writing that the deal could still fall through for csr? Or sit on the stock and get 6.50? Like so many articles by you and your fool team, things are foggy. What about the shareholders that paid more than 6.50? Should they sell and be happy? What happens if the deal falls through and the stock kept going up? What if I keep subscribing to other stock newsletters where at least the writers hold some of the stocks instead of these financial advisor wannabes.

  • Report this Comment On May 27, 2011, at 2:37 AM, baloo135 wrote:

    I have CSR stock. How do I sell it for 6.50 a share?

  • Report this Comment On May 27, 2011, at 9:42 AM, cstash wrote:

    just sit on it, according to csr it is going priveate at 6.50 a share max, I might be wrong, but if you don't sell your share before deadline, all outstanding shares will be purchased at 6.50 max if the deal goes through, which it sounds like it will. If you purchase outstanding shares right now, it is a easy 20% minus the short term tax rate, if deal falls through I still like the company, but I think the stock could hit high fours if it does fall through.

    Good luck.

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