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 St. Picks
Wall St. Bullish Sentiment
Est. EPS Growth Next Year
|Amarin (Nasdaq: AMRN )||****||5||100%||115%|
|Cellcom Israel (NYSE: CEL )||****||3||67%||(7%)|
Source: Motley Fool CAPS.
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
A couple of weeks ago, I got cheeky and noted developers of fish oil therapies like Amarin and GlaxoSmithKline would be put out if a new study that found fish oil did nothing to prevent heart attacks held up under closer scrutiny. I pointed out GSK generates a billion dollars annually from its treatment Lovaza, and many analysts expect Amarin's AMR101 to steal a lot of Lovaza's market share if and when it hits the market because of its efficacy and lower risks.
My apples-to-oranges comparison -- or as stereoandy commented, "apples to gorillas" -- was a bit off the mark. The cruder compounds used in the study apparently can't be compared to either Lovaza or AMR101 because "Lovaza is a much more highly purified concentrate, and AMR101 is an even higher concentration of pure EPA with no DHA (the element in Lovaza believed to elevate ldl)." EPA is eicosapentaenoic acid and DHA is docosahexaenoic acid, but I'll admit the actual science makes my eyes glaze over.
Amarin seems to have a real winner on its hands and with possible FDA approval coming around next month, I'll be maintaining my outperform rating on CAPS -- and I won't be so quick to be cheeky. Let me know in the comments box below or on the Amarin CAPS page if the doubters are just peddling snake oil, then add the biotech to the Fool's free, personalized stock-tracking service to be alerted immediately when the FDA releases its decision.
Hung up on growth
There's been a lot of static in the Israeli cellphone arena as new players offering lower prices roil the market. Cellcom Israel, the country's largest cellphone provider, has lost nearly three-quarters of its value over the past year as new entrants came into the marketplace and are offering discounted plans for talk, text, and Internet.
Like Verizon, Sprint (NYSE: S ) , and T-Mobile, Cellcom has had to react to the low-price plans by cutting its own prices. U.S. telecoms have cut prices, too, or introduced prepaid services, such as Sprint did with Boost Mobile, to compete with MetroPCS (NYSE: PCS ) and others.
The results of the new competitive landscape showed up in Cellcom's quarterly earnings report that saw profits plummet 43% from last year. The loss in the stock's value will also cause it to get dropped from the MSCI Israel Index. Second-place Partner Communications (Nasdaq: PTNR ) also witnessed a huge drop in profits, and it has withdrawn plans to issue a dividend. Apparently after being coddled by the Israeli government for so many years, the state is now issuing new licenses and just five entrants have upset the apple cart.
So it's hard to see what the investing thesis might be for Cellcom. Although it pays a dividend that currently yields 14.5%, free cash flow plummeted 64%, which suggests the payout is going to be unsustainable.
Yet 96% of the CAPS All-Stars rating the cellular operator believe it can still beat the Street. I'm not so sure and marked it to underperform the broad indexes, but let me know on the Cellcom Israel CAPS page or in the comments below what will have this company turn around, then add it to your watchlist to be alerted of any changes.
Swing for the fences
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