Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. Getting in before Wall Street discovers them -- or rediscovers them -- means you can stake a claim before they start taking off.
Here we check out companies with minimal analyst coverage at best and 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 Street Picks
Wall Street Bullish Sentiment
Estimated EPS Growth Next Year
|Sun Life Financial (NYSE: SLF )||****||5||60%||9%|
|Teekay Tankers (NYSE: TNK )||****||4||50%||17%|
Source: Motley Fool CAPS. NA = not available.
Remember, without much analyst support, you'll have to do more digging on your own to see whether these stocks deserve a spot in your portfolio, so don't just buy or sell them based solely on their appearance here.
Hiding in plain sight
Until 2012, it probably was a good idea if you hadn't known about Sun Life Financial. It hasn't been able to generate much enthusiasm since reaching a peak of almost $60 a share back in 2007, much of the time trading at about half that value.
Last year was no different, as low interest rates, stock market volatility, restructuring charges, and weakness in its core operations kept the stock depressed. But it's in turnaround mode now, and analysts see the moves as key to getting back on track. For example, it discontinued new sales of domestic variable annuity and individual life insurance products to instead concentrate on employee group insurance.
Selling life insurance in India and China is a key initiative, as the growing middle class there leads to an increase in the demand for private pension, savings, and health-care needs. Its Everbright division says sales jumped 70% in 2011, but going up against China Life Insurance (NYSE: LFC ) means there are some well-financed competitors also eying the market, and Manulife Financial (NYSE: MFC ) is targeting the region, too.
So far this year, Sun Life's stock is up 25%, even after having given back a few percentage points of gains. CAPS member DrakeMB sees this trend continuing: "Now that they have left much of the U.S. market and are focused on areas of higher growth for the company they should start to see some positive results. Lots of bad news factored in and hopefully lots of upside in the next few years."
Let us know your views of its prospects for success on the Sun Life Financial CAPS page, and add the financial services specialist to the Fool's free, personalized stock-tracking service and see whether its strategy of looking everywhere but at the U.S. will pay off.
Stuck in the doldrums
After rates rallied and carried tanker operators such as Teekay Tankers and Frontline (NYSE: FRO ) higher on the tide of recovery, the industry is poised to be swamped once again as expanding oil cargoes fill storage tanks to capacity. Demand is lagging output, and analysts see rates for very large crude carriers, which can hold up to 2 million barrels each, dropping 58% on average to $19,750 a day.
Teekay's stock is 65% so far in 2012, and Frontline is more than 50% higher. But add to the equation an unrelenting glut of ships on the high seas -- and more still to come -- and it seems any confidence Wall Street put in Teekay and others sailing through this storm is misplaced as the industry remains tempest-tossed. Having benefited from rates that quadrupled off their lows, it increasingly appears to be another season of slow steaming.
I've marked Teekay to underperform on CAPS, because I just can't see how it or the other tanker operators will surmount the excess-ship obstacle. Fitch Ratings sees the oversupply lasting until at least 2014 and also sees the financials of operators deteriorating in conjunction with it, so until ship scrapping and the introduction of new vessels reaches an equilibrium, I think Teekay will be a subpar performer.
Swing for the fences
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