Stocks on the Road to Greatness

For every stock out there screaming, "buy me," others simply give us a nudge and a nod. While all the attention might be focused on their five-star peers, we can sift through Motley Fool CAPS to find four-star stocks giving us the "high sign" that they're approaching greatness. 

These opportunities -- including familiar names and beaten-down companies -- rank higher than most of the other 5,400 starred companies, and it pays to investigate their potential. For consideration today I have a pair of stocks on their way to fame and glory.

Source: Motley Fool CAPS.

As the 180,000-member CAPS community has chosen these two companies as less obvious sources for tomorrow's great buys, let's see why they might merit your attention.

In the sight of greatness
It's a bit of a chicken-or-the-egg conundrum, but do you build out a national infrastructure of natural gas refueling stations, as Clean Energy Fuels is doing, or do you make the vehicles first, powered by the engines made by Westport Innovations (Nasdaq: WPRT)? Certainly there's something of a simultaneous creation that needs to happen, but as the electric-vehicle market is finding out, it's not always the road to success.

Syracuse, N.Y., got a $700,000 government grant last year to install 68 EV charging stations -- despite the fact that there are only 30 electric or electric hybrid cars in the five counties surrounding the city. Worse, the politically connected company now has to rip them all out and replace them, since the manufacturer sent them the wrong ones.

So far, natural gas has made a noticeable impact with commercial vehicles as delivery companies, trash haulers, and other firms that operate big fleets switch to save on fuel costs. Caterpillar even wants to team up with Westport to make mining and other off-road vehicles that run on natural gas. So unlike EV charging stations, Clean Energy Fuels' infrastructure can survive with just truckers using its network. The real growth catalyst, however, will come if manufacturers can make consumer models. That will be the real leap forward for the industry.

CAPS member LouPerna says you also can't ignore the low prices and plentiful supplies that make natural gas attractive: "The glut will end (they always do) and drills will become profitable, but abundant supplies will mean a sea-change away from gas and toward NG for the trucking industry."

Ener-negative returns
It's those low prices, though, that have driven down the shares of Enerplus, an independent Canadian oil and gas firm with assets in Canada's oil sands, as well as the important Bakken and Marcellus shale formations in the United States. The depressed market caused the driller to slash its dividend in half two weeks after it announced it was paying the dividend in the first place.

While it's a prudent decision to make, it underscores the industry's problem. Natural gas companies are bound by their properties and have to develop them, but in so doing they're hurting current cash flows. Fortunately for Enerplus, it has those rich Canadian oil sands to turn to. It's focusing 70% of its capital-expenditure budget toward oil and natural gas liquids, which carry higher margins.

While drillers from Enerplus to Chesapeake Energy (NYSE: CHK) and Kodiak Oil & Gas (NYSE: KOG) will continue to develop their properties to their detriment today, they will be building up cheap inventories they'll be able to sell at substantial profits in the future. As LouPerna said, gluts always come to an end.

CAPS member cdors correctly predicted last month that Enerplus would need to cut its dividend, and it speaks to continuing weakness with its shares for the immediate future. While a long-term horizon is always beneficial when investing, I don't see any reason right now to close out my own underperform rating on CAPS. I don't think the company has reached an inflection point with its stock, even though it's been cut in half over the past year.

Add Clean Energy Fuels and Enerplus to your Watchlist, and tell me in the comments section below whether you think either is about to drive off with new growth.

A great opportunity for you
Investor sentiment suggests that these four-star investments are on their way to five-star greatness, but while cars and drugs might be hurting, the smartphone and tablet revolution is still gaining legs. You can read The Motley Fool's report on three hidden winners of the iPhone, iPad, and Android revolution to find out more. This report will be available only for a limited period. Get it before it's gone!