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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.
CAPS Rating (out of 5)
Wall St. Picks
Wall St. Bullish Sentiment
Est. EPS Growth Next Year
|Antares Pharma (AMEX: AIS )||****||1||100%||NC|
|CVR Partners (NYSE: UAN )||*****||0||N/A||<1%|
Sources: Yahoo! Finance; Motley Fool CAPS. NC = not calculable; N/A = not available.
Remember, without much analyst support, you'll have to do more scouting on your own 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
The efficient-market theory got stood on its head last month when shares of Antares Pharma plummeted after BioSante Pharmaceuticals reported it had halted testing on its "female Viagra" LibiGel because the topical cream did no better than a placebo in raising the libido of women. Antares supplies BioSante with the gel needed to make the cream. The only problem is, BioSante represents just a tiny fraction of Antares sales; it derives most of its revenues from Teva Pharmaceutical (Nasdaq: TEVA ) and privately held Ferring Pharmaceuticals, and it has partnerships in place with Pfizer and Jazz Pharmaceuticals (Nasdaq: JAZZ ) , too. The problems at BioSante should have minimal if any impact on Antares' performance.
EMT suggests that the market has perfect knowledge and that stock prices reflect all available knowledge. Yet it's inefficiencies like the above that give investors a chance to achieve outsize gains. Shares of Antares have bounded 50% higher in the weeks after, as investors realized that BioSante wasn't going to be a bioshock to the system.
Losses are expected to improve for the year when Antares reports fourth-quarter results, and it's anticipated to turn profitable thereafter. CAPS member micro1943 expects its pipeline of drugs to secure it a stable future: "Excellent management, solid stable of products and positive earnings which will be coming within a few months."
Let us know in the comments section below or on the Antares Pharma CAPS page whether you think the market can be a messy, inefficient arena, then add it to your watchlist to be notified when the stock gains altitude.
Pure-play nitrogen producer CVR Partners ought to benefit from improving commodity prices, particularly for corn and wheat, both of which have seen strong price appreciation lately. After a torrid rate of growth early last year, grain prices crumbled, taking with them fertilizer producer PotashCorp (NYSE: POT ) , which has lost a quarter of its value over the past six months (both CVR and PotashCorp have recorded double-digit gains in the last 30 days).
As demand for crop fertilizer expands, CVR, as one of the leading producers of fertilizers in the U.S., ought to do well. It produces about 2,000 tons of urea ammonium nitrate and about 1,200 tons of ammonia per day. With its healthy dividend, which currently yields 7.9%, investors will also do well while waiting for the fruits of its labors to blossom. That could be why all 72 CAPS All-Stars rating the nitrogen producer believe it will outperform the broad market averages.
Swing for the fences
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